Schwieterman: New Buying Driving Live Cattle Futures Market Price

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Corn                                             Estimated Fund Position
Trends
Short Term: Down
Long Term: Down                       Net Long Futures and Options: -31927
Overnight Trade: N -2 3/4         Change: +15000
Opening Calls: 1-2 Lower


The corn market exceeded expectations yesterday and regained all of the post Prospective Plantings/Quarterly stocks report losses. The corn never built upon the losses that were made in the initial reaction to the report and it seems that short traders gave up yesterday and took profits. The market bounced back to the previous area of consolidation, so we will probably see a sideways session today as traders wait for tomorrow’s supply and demand numbers. The reaction to tomorrow’s numbers will likely determine the trend for the rest of the month. Export sales were very good for a change at 1.36 MMT.

Wheat                                         Estimated Fund Position
Trends
Short Term: Up                          Net Long Futures and Options: -68679
Long Term: Down                     Change: +5000
Overnight Trade: Chicago: N -4 3/4 KC: N -4
Opening Calls: 3-5 Lower

The wheat was surprisingly strong yesterday as well. I can’t make much of a fundamental case for the strength in the wheat, but the charts are certainly looking better. The July KW has moved through trend line resistance and short term technical indicators are giving buy signals. Look for the July KW to move up to the $5.08 area in the short run. Export sales were adequate at 323,700 MT for the old crop and 209,700 MT for the new crop.

Soybeans                                   Estimated Fund Position
Trends
Short Term: Down                   Net Long Futures and Options: 3586
Long Term: Up                        Change: +4000
Overnight Trade: N -1 3/4
Opening Calls: 1-3 Lower


The soybeans continue to trade in the same sideways/higher pattern they have been stuck in since early February. Like the other markets, the soybeans failed to push lower after the initial negative reaction to last week’s reports and the market finally got a bounce yesterday. Follow through higher today or tomorrow would turn a number of technical indicators up, so like the corn, the reaction to tomorrows numbers will be very important. Export sales were good at 205,700 MT for the old crop and 238,000 MT for the new crop.

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


Live cattle futures opened and closed sharply higher on Wednesday, with sharply higher cash and new buying driving market price. Futures remain discount to the high end of cash trade this week, providing continued support for bull spreads in the market. With cash trade basically complete for the week, futures could see quieter two sided trade today and on Friday. Cutout values remain strong, providing continued manageable margins for the packers. Overnight trade has trended marginally lower, as some profit taking and fresh hedging takes place.

Feeder Cattle
Trends
Short Term: Up
Long Term: Up
Seasonal: Up
Opening Call: 20-50 Lower


Feeder cattle futures posted triple digit gains on Wednesday, as strength in the live cattle outweighed 9-10 cent gains in the corn futures. If corn is able to follow through on Wednesday’s rally, we could see some additional hedging surface in the feeders. Overnight trade was lower across the board, with some contracts giving up as much as .90 in early morning activity. The extreme overbought conditions and high profitability is likely to bring additional producer hedging. Late summer contracts reached above the lower end of historic highs in the complex, above the 116.00 level early on Wednesday.


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