5-5-14 â€“ Speculative traders reversed their market outlook in the week ended Tuesday and began taking on long positions, according to the Commodity Futures Trading Commissionâ€™s Commitments of Traders report.\r\n\r\n The move reversed a three-week liquidation trend, and while no one knows the thought processes behind fund trading decisions, it appears renewed fears of corn planting delays and parched Hard Red Winter wheat ground may have played a part.\r\n\r\n Last week, the Wheat Quality Councilâ€™s annual Kansas Wheat Tour showed fields heavily damaged by drought and cold, many of which would not live up to their potential even if they got rain. However, forecasters have a generally dry outlook for the area.\r\n\r\n Tour participants Thursday estimated the Kansas crop at 260.7 million bushels, down 18% from the 319.2 million last year, on an average yield of 33.2 bushels an acre, which is down 12.6% from 2013â€™s 38 bushels, according to Farm Futures. This would be the smallest crop since 1996 when a late planting date combined with drought and freezing temperatures to produce 255.2 million bushels.\r\n\r\n The commodity fund move toward adding long corn positions, may have been a touch out of step with reality, however. The May contract dropped 22.5 cents a bushel, or 4.36%, last week as Midwest weather conditions improved.\r\n\r\n \r\n\r\nTHE NUMBERS TELL THE TALE\r\n\r\n \r\n\r\n The latest weekly disaggregated Commitments of Traders report showed Managed Money (a proxy for speculators) expanded their long corn positions by 23,468 contracts while balancing that with only 2,139 fresh short positions. At the same time, commercial traders (producers, merchants and processors) reduced their long positions by 20,433 contracts and increased short positions by 16,305. It appears the commercial segment of the trade sees something more promising about production prospects.\r\n\r\n For Hard Red Winter wheat, managed money added 1,821 long contracts but balanced that with 1,904 fresh short positions. Commercial traders were less confident about crop prospects, adding 2,202 short positions and liquidating 704 longs.\r\n\r\n But while Hard Red Winter wheat is seeing more damage, the Soft Red Winter wheat market in Chicago grabs the most volume, and commercials there added 14,629 short positions and liquidated 5,346 longs. Managed money took the opposite stance and added 8,621 long positions while liquidating 4,574 short positions.\r\n\r\n Position changes in live cattle were less robust. The CFTC reported that Managed Money added 1,750 long positions and only 458 short positions, while commercial traders liquidated 501 long positions and 513 short positions.\r\n\r\n \r\n\r\nCASH CATTLE MARKETS PULL FUTURES HIGHER\r\n\r\n \r\n\r\n Led by wide discounts to the cash market and unexpected strength at the feedlots, live cattle futures rose to new contract highs last week, although profit taking trimmed gains on Friday.\r\n\r\n Cash cattle were up in spite of lower beef prices, which should have been a drag on cattle. The USDAâ€™s choice cutout value Friday was down $1.96 per cwt to $228.38 and ended the week down $4.45. The select cutout Friday was $217.47, down $3.51 on the day and off $4.17 for the week.\r\n\r\n Increased slaughter rates, producing more beef, were cited by many for the pressure on beef. Slaughter last week remained below last year but, at 608,000 head, was 3.93% above the 585,000 of a week earlier.\r\n\r\n Tight supplies of feeder cattle may continue to support this market. Futures and cash markets were up last week because of limited supplies and because of the weaker corn market.\r\n\r\n The CME Feeder Cattle Index for the seven days ended Thursday was $179.56, up $0.53, while the May futures contract settled Friday at $183.50, down $0.45. June live cattle settled at $138.05, down $1.20.\r\n\r\n \r\n\r\nIN OUR OPINION\r\n\r\n \r\n\r\n–If cash cattle prices continue to hold, or even work higher, futures will have no choice but to rise in concert.\r\n\r\n–The feeder cattle market is technically overbought and due for a correction, but the fear of even higher prices is likely to keep it that way.\r\n\r\n–Escalating clashes in Ukraine make a Ukraine civil war a greater possibility. \r\n\r\n–May is â€œBeef Monthâ€ and could generate more advertising and consumption.