Schwieterman: Live cattle futures follow equity markets lower

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Corn                                          Estimated Fund Position
Trends – December Contract
Short Term:Down                      Net Long Futures and Options: -206491
Long Term: Down                      Change: -16000
Overnight Trade: Z -2 @7:30 AM


The 824 million bushel stocks estimate was a bearish surprise and seemed to be following USDA’s tradition of releasing random numbers for stocks estimates. The higher than expected estimate makes it very likely that the new crop ending stocks estimate will be over 2 billion in the October supply and demand report, and it will be very difficult to put anything but a bearish spin on that. The market made multiyear lows yesterday and again overnight. The next stop for the December contract is $4.25.

Wheat                                       Estimated Fund Position
Trends – December Contract
Short Term: Up                         Net Long Futures and Options: -63219
Long Term:Up                           Change: -2000
Overnight Trade: Chicago: Z -1 KC: Z -1 @7:30 AM


The HRW fundamentals are bullish. When the October class by class breakdown is released the HRW stocks will be very near 2008 levels and the market will be very sensitive to any fresh demand and to weather in the HRW Belt. The big question will be whether or not the corn and soybeans act as an anchor to the wheat? The fundamentals say to buy Kansas City and sell Chicago and sell corn and  hopefully that is what the spread traders do. Look for $7.70 in the December KW.

Soybeans                                 Estimated Fund Position
Trends – November Contract
Short Term: Down                    Net Long Futures and Options: 87218
Long Term: Down                    Change: -12000
Overnight Trade: X -15 @7:30 AM


The soybean stocks estimate was also higher than expected at 141 million bushels, which has taken away much of the bullish luster of the soybean market. The yield and acreage estimates in the October report are still critical, but the extra beginning stocks will definitely keep the stocks levels more comfortable. The next downside target for the November contract is $12.56.

Live Cattle
Trend
Short Term: Up
Long Term: Up
Opening Calls: 10-30 Lower


Live cattle futures followed the equity markets lower on Monday, with thoughts of a government shutdown looming over the markets. We do have the shutdown this morning and with 800,000 government workers on furlough, it may be difficult to rally the meats. Show lists are modestly larger this week, reflecting some cash enthusiasm. Next Monday is first notice for delivery on the October contract, which may limit upside potential unless cash prices continue higher. Cutout values look supportive to begin the week and slaughter is off to a slow start.

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


Feeder cattle futures closed narrowly mixed on Monday, with the front month modestly lower and deferred contracts better on lower corn prices. Overnight trade is mostly softer, as news of the government shutting down and overbought conditions weigh on this market. Cash index levels rose to another all-time high of 159.63, with weekend averages slumping below the 159.00 level. Cash receipts for the past few weeks continue to indicate fewer numbers of feeders available to the market.



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