Happy New Year market watchers!
Well, we have arrived. The last article of the year. This completes the fifth full year of the Sidwell Strategies CommodityBuzz! That adds up to 260 weekly perspectives on the markets and developments in the local and global agriculture industries. It’s been an effort, but also a pleasure to connect with followers from around the country and across the world.
Continuous improvement is a core principle and so let us know if there is something you’d like to see covered in greater depth.
The 2023 trading year ended Friday just off the all-time highs put in on Thursday. There has been incredible strength across stock indices ever since the Federal Reserve indicated rate hikes are over and cuts could be on the horizon. In fact, there are now anywhere from 3-6 rate cuts being forecasted in the new year.
Despite markets making such upward moves in a few short months, there is anything but consensus on what lies ahead. The shorts are undergoing a massive squeeze while longs are nervous to lose meaningful gains while sideline money is having severe FOMO (fear of missing out). And there is a lot of money on the sidelines. We could yet see more buying if global economic conditions remain stable and the Fed continues its more dovish commentary, but January is often a tricky month for traders especially after such a surge to end the calendar year.
The value of the US dollar made another weekly low again this week. We are now back to the July 20th levels, just two trading sessions from the prior reversal higher that started after the July 18th low at 99.22. That’s within five trading sessions of the wheat market’s high on July 25th before the $3.32 tumble in Kansas City wheat and $2.53 loss in Chicago wheat.
While we’re not out of the woods just yet, we are trading above rather than below the trendline. Tensions reached new heights in the Black Sea this week that could be the trigger needed to set this off this wheat market. Although markets have completely discounted risk premium from this conflict in the past six months, it may be time again that risk premium is added back. Ships are now hitting mines and Russia just launched its largest drone and missile attack this week on Ukrainian cities. Wheat will be the wild card of 2024.
Row crop markets have seen disappointing performance with increased agreement of rains coming to Brazil and Argentina. Regardless, damage has been done to top end yield expectations, but to what extent remains uncertain. Meanwhile, US export demand has remained firm, which the sinking US dollar will only continue aiding that trend.
For the month ahead, corn and soybean markets will move with the South American weather patterns. If rain totals disappoint or are not as widespread, we could see quick short covering. January soybean futures were rolled to March this week, which is now front-month for cash basis.
Back to money on the sidelines, there is potential it finds its way into commodity markets. Several energy and agriculture markets have been suppressed and we could see another move higher, which would further complicate the inflation story and forecast of rate moves.
The cattle market chopped sideways this week fending off the bearish bias to last week’s Cattle-on-Feed report. After a sharp selloff and gap lower on Tuesday’s open, markets rebounded intrasession, filling the gap and closing positive on the day. Cold weather and heavy snow in the Northern Plains provided underlying support and we will likely see more of this in the coming months.
Post-holiday demand is usually slow, but recent strength in fed cash cattle trades suggest a stronger underlying demand tone. That could play positive for a larger recovery in this market over the coming months. We could see choppy trade to start the new year, but I believe we could see markets head towards higher chart gaps before March. I believe the bullish fundamentals will begin to be bought soon again. If you locked in hedges or LRP at a higher rate and would like to capture this selloff, call us to buy call options that helps you capture the upside should this market rebound.
There are a couple events in January that you won’t want to miss. The 2024 KNID AgriFest will be January 12-13th at the Chisholm Trail Expo Center. Join Sidwell Strategies and our sister companies including Enid Brewing Company to kick off the new year and discuss our various products and services to help increase your profitability. Enterprise Grain and Sidwell Strategies will then be hosting our annual producer meeting at Enid Brewing on Thursday, January 25th at 5:30 PM. Call (580) 874-2286 to RSVP.
We will be discussing market outlook and strategies, specialty crop programs and commodity premium programs as well as agronomy. We appreciate all of our followers and clients for your business and look forward to continuing to help our producers and investors to build your operations and portfolios.
Sidwell Strategies is the one-stop shop to protect cattle with futures, puts, LRP or a combination of all, which is probably the best strategy overall. If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives. Self-trading accounts are also available.
It is never too late to start and there is no operation too small to get a risk management and marketing plan in place. Wishing everyone a successful trading week! Let us know if you'd like to join our daily market price and commentary text messages to stay informed!
Brady Sidwell is a Series 3 Licensed Commodity Futures Broker and Principal of Sidwell Strategies. He can be reached at (580) 232-2272 or at brady@sidwellstrategies.com. Futures and Options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at http://www.sidwellstrategies.com/disclaimer.
On the date of publication, Brady Sidwell did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Disclosure Policy here.
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