Schwieterman: News of a drop in corn lifts feeder cattle futures

Corn                                              Estimated Fund Position
Trends
Short Term:Down                      Net Long Futures and Options: 72919
Long Term: Down                      Change: -10000
Overnight Trade: H -3 @7:30 AM

The overnight low of $6.93 ¾ in the March contract is between the 75 and 78% retracements of the January rally. The market is oversold and due for a correction and the overnight low is as good a place to start one as any. A 50% retracement of the move down would take the market back to $7.20 and near the 50-day moving average. Basis levels keep improving, which is supportive to the old crop contracts, but it seems that the new crop is sucking the old crop lower. Ideas that ending stocks will balloon are hard to overcome.

Wheat                                            Estimated Fund Position
Trends
Short Term: Down                       Net Long Futures and Options: -65653
Long Term: Down                        Change: -4000
Overnight Trade: Chicago: H -3 KC: H -1 @7:30 AM

There isn’t much positive to say about the wheat. The March KW is now at a critical support level. If the market takes out the January low it would suggest we will see another leg lower in the market and perhaps see a move down to last spring’s low near $6.65. This market needs to see exports improve soon. The weather in the HRW Belt is supportive, but if supplies are plentiful, then another short crop won’t matter.

Soybeans                                      Estimated Fund Position
Trends
Short Term: Down                      Net Long Futures and Options: 73393
Long Term: Down                       Change: -7000
Overnight Trade: H +5 @7:30 AM

The soybeans are seeing a bounce overnight, but so far there isn’t much indication that the market is ready to turn around. The $14.20 level still looks like a probable downside target this week for the March contract. The price break will probably attract more demand, which we really can’t handle, but at the moment, traders are more concerned with the potential for higher new crop stocks than they are with the potential for extreme tightness this summer.

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

Live cattle futures recovered from early weakness to close moderately higher on the day. April closed 1.27 off of the daily low, supported by some heavy liquidation of shorts in the market. Open interest dropped 3,905 contracts for the session. Show lists are significantly smaller for the week, with our list off 23% from a week ago. Many analysts suggest that kills will continue to need trimming to get the meat higher. There may not be much of a choice, if available numbers continue to shrink. Overnight trade is modestly firmer, with outside markets looking more supportive.

Feeder Cattle
Trends
Short Term: Down
Long Term: Down
Opening Call: Mixed

Feeder cattle futures closed moderately to sharply higher on Monday, with the exception of the modestly lower March contract. Deferred contracts were boosted by ideas that corn prices are expected to drop dramatically as the year progresses. Overnight activity is modestly higher in the front 4 months, with next fall a little lower. Corn prices are off another 2-4 cents.

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