Schwieterman: Feeder cattle futures lower as corn rallies

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Corn                                      Estimated Fund Position
Trends – December Contract
Short Term:Down              Net Long Futures and Options: -184064
Long Term: Down              Change: +9000
Overnight Trade: Z +6 @7:30 AM

Corn was higher overnight, but still has a long way to go to take out Monday’s high and turn short term trend indicators higher. Some of the driest areas in Iowa received rain overnight/this morning, which will help with crop development there, but some traders are still concerned about the crop being behind normal and are worrying about an early freeze. With the market oversold and the funds hold a record net short position, these concerns can lead to a short covering rally. Export sales were good with the old crop showing net cancellations of 59,100 MT, which doesn’t matter, and new crop sales of 836,100 MT.

Wheat                                    Estimated Fund Position
Trends – September Contract
Short Term: Down              Net Long Futures and Options: -81424
Long Term: Down               Change: +1500
Overnight Trade: Chicago: U +3 KC: U +1 @7:30 AM


The wheat is still range bound, but the September KW did hold at trend line support yesterday and the market has been trying to work higher from there. Export sales were good at 490,100 MT. The good sales should keep a bid under the market, but so far the sales haven’t been able to move the market higher. The overnight high of $7.02 is the first technical hurdle the market has to contend with, followed by $7.07 and $7.10. If the gains in the corn hold, perhaps the wheat can finally break out.

Soybeans                              Estimated Fund Position
Trends – November Contract
Short Term: Up                    Net Long Futures and Options: 20804
Long Term: Down               Change: +5000
Overnight Trade: X +10 @7:30 AM

The soybeans are beginning to exceed expectations thanks to concerns about crop development and strong export sales. Overnight the market moved through the $12.44 objective and nearly reached the 50-day moving average, which is at $12.55. Technical indicators are beginning to get overbought and crop condition ratings are still above average, which makes me think the rally has run its course. Export sales were great though at 1.89 MMT for the new crop and strong demand will make traders nervous about supplies next summer.

Live Cattle
Trend
Short Term: Up
Long Term: Up
Opening Calls: Mixed

Live cattle futures closed modestly higher on Wednesday, with traders looking for direction from the weeks untapped cash trade. Cutout values were sharply higher, suggesting that Labor Day demand looks favorable. The mild weather has benefitted the grilling season, with comfortable August temps a rarity. Feedlots are likely to hold close to asking prices of $124 in the south and $200+ up north into weeks end. Open interest continues to slowly climb in spite of the liquidation of the August contract.

Feeder Cattle
Trends
Short Term: Up
Long Term: Up
Opening Call: 10-30 Higher


Feeder cattle futures settled moderately lower on Wednesday, taking their direction from the rally in corn futures. Cash index levels remained on the rise, closing the day at 152.01. It appears that the index rally will continue based on the strength in yesterdays’ cash sales. Strength in overnight corn values could limit gains in the feeders today. Open interest is rising as we head into a promising wheat pasture season.



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