Schwieterman: Rising corn prices slam cattle futures

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Corn                                    Estimated Fund Position
Trends – July Contract
Short Term: Up                   Net Long Futures and Options: 88035
Long Term: Up                    Change: +11000
Overnight Trade: N +4 @7:30 AM


The corn was very active overnight with the July contract trading in a 12 cent range and finishing the session nearly 7 cents off the high. The overnight high was in the vicinity of the 75 and 78% retracements, which was our latest upside objective. Export sales are much too strong right now and if they don’t slow down soon, our stocks situation will go from comfortable to bullish. Bull spreading is very active and will continue until the demand slows.

Wheat                                     Estimated Fund Position
Trends – July Contract
Short Term: Up                       Net Long Futures and Options: -38169
Long Term:Up                         Change: +1500
Overnight Trade: Chicago: N +12 KC: N +9 @7:30 AM


The July KW made a new high for the move overnight thanks to the strength in the corn and the dry conditions in the HRW belt. The technical indicators still suggest this market is running out of steam, but obviously a market can stay overbought for a long time. If the wheat holds gains today the next upside objective for the July KW will be the $7.50 area.

Soybeans                                Estimated Fund Position
Trends – July Contract
Short Term: Up                        Net Long Futures and Options: 193619
Long Term:Up                          Change: +6000
Overnight Trade: N +15 @7:30 AM


Like the corn, export sales are still much too strong. The way the numbers are shaping up, we will have to see significant imports to avoid shortages in the US. It will be very, very interesting to see what USDA does with the supply and demand tables to make the numbers work out. Meanwhile, like the wheat, the technical indicators suggest we need a correction, but the market keeps moving higher. The next stop for the July beans is probably $14.50.

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


Live cattle futures closed moderately lower across the board on Thursday, with moderate cash trade slightly below week ago levels. Beef cutouts were up another buck or so, as packer margins have improved significantly so far this week. The jobs report came in better than expected this morning; giving equity markets a boost to new alltime highs. The equity push should be supportive to livestock markets. April remains a large discount to recent cash trade. If the lows of Wednesday are able to hold into late trade today, we could see a rebound effort.

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


Feeder cattle futures were the downside leaders in the livestock complex on Thursday, with pressure stemming from sharply higher corn prices. Corn is trending higher in overnight trade, but are well off of the session highs as we write. The feeders are trying to rebound along with the correction in corn. We look for decent support to develop near overnight lows in the feeders.



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