Strong weekly performance in wheat and cattle futures

Howdy market watchers! 

It continues to rain in the Southern Plains.  We continue to be grateful for the blessing of moisture that has now completely restored our soils from consecutive years of drought.  So much so however that additional precip at this point is running off helping ponds refill.  The saturation will prolong any field work for some time.  

Again, make hay when the sun shines with windows likely to be short to be able to apply topdress on winter wheat or prep work for full season crops that will be coming up soon enough.  

Thank you to everyone that attended our Annual Winter Producer Meeting.  We had a great turnout and covered important topics from marketing and risk management of crops and cattle to specialty crop contracts offered by Enterprise Grain in addition to fertilizer and chemical offerings and application including lime and grid soil sampling to details of the ARC or PLC decision with the March 15th deadline, introduction of Bushel Farm, formerly FarmLogs, that integrates Enterprise Grain’s electronic scale and ticket platform through Bushel, to variable rate nitrogen through Ninja Ag.  Please give us a call if you would like to get details on what you missed.  We have some exciting programs offered in 2024 to help boost your profitability.  We want to thank food and agtech investor Germin8 Ventures, based out of Chicago, for sponsoring the evening.  

Getting your nitrogen amounts and placements right on winter wheat is the first of these.  Through Ninja Ag, Enterprise Grain offers the complete solution to evaluating how much nitrogen you need or don’t need on every acre through satellite or drone imagery.  While this may sound high tech and it is, this is made easy for the producer by working with your crop advisor including Enterprise Grain.  When margins are tight, it is critical to not overspend on inputs.  

Variable rate lime after taking grid soil samples is commonplace, yet why do we all still flat rate apply nitrogen?  It is because no accurate solution has existed until now through Ninja Ag.  This company was formed to commercialize all the decades of Oklahoma State University research on nutrient management to empower the farmer to gain the best odds at predicting yield and optimizing dollars spent on nitrogen.  

Now is the time to apply nitrogen rich strips in fields, although not required, as an easy to see litmus test of when nitrogen is needed.  The variable rate shape file that we then create from satellite imagery of your live field tells you exactly where and how much nitrogen is needed.  All recently modern dry and liquid application rigs already have variable rate capabilities.  

If you are a Cooperative or crop advisor, Ninja Ag is also available to offer to your producers and so give us a call about how to plug in to this unique technology that will soon be the standard when applying nitrogen to any crop.  This is not limited to Oklahoma nor is it limited only to the U.S.  We are already working with producers in Brazil and Australia and this technology is available to anyone with internet access.  

Visit https://ninjaag.com to get started.  This tool also helps with yield prediction, which we use for marketing and risk management quantities.  

It was an exciting week across commodity markets with the bulls taking back charge. After new recent lows last week, Kansas City wheat staged an impressive recovery that saw take-back profit taking on Friday.  Chicago wheat surged above the crossover of the 20-, 50- and 100-day moving averages that looked to be support although the take-back Friday move left futures contracts just below this price level.  As far as price targets over the coming months, I believe we could see July KC wheat reach $6.60 and possibly the $6.80-level.  For Chicago wheat, the $6.60-6.65-level.  

The rally for row crops was less impressive with weekly highs put in Thursday with follow-through selling extending through Friday for both corn and soybeans.  We need the new crop December corn futures to hold the $4.70-4.75-level and new crop November soybeans to hold $11.80.  There is a gap on the November soybean chart at $11.63 ½ and could be where we are headed.  There is also a large chart gap above on November soybeans that will be filled at $12.44 ½.  

The same is true for December corn that will be filled at $5.03.  News from South America continues to be mixed although not disastrous enough to sustain a rally, as yet.  At this point, it’s going to take final production numbers before the market reacts to headlines.  

Major protests in Argentina this week in opposition of the new president will likely stall his agenda to push more grain exports out of the country.  Argentina did just get approval to export wheat to China and is a sign of what I believe is a material shortage of supplies in the PRC. US export demand has been weak, but has started to reappear.  

The US dollar will play a key role.  This past week was just sideways chop of the US dollar index.  The Federal Reserve’s FOMC will announce it’s next interest rate decision on Wednesday at 1 PM CDT.  “No change” is largely expected.  Much discussion has emerged in the past weeks on just how many possible cuts could be seen this year, with fewer expected than was the case just a month ago.  

The US GDP grew 3.3 percent in the 4th quarter of 2023, which is lower than the 4.9 percent in the 3rd quarter, but higher than was expected.  This is productivity and not inflation as Treasury Secretary Yellen reacted upon the release, but is still a sign of a strong economy that keep inflation firm.  

A resurgence in crude oil markets will contribute to inflation concerns if sustained.  Friday’s close above $78.20 per barrel means crude oil futures rallied nearly $6.00 per barrel this week from it’s low on Monday.  Ukrainian drone attacks on Russian energy export ports and continued escalation of the Red Sea attacks on vessels has brought risk premium back to the oil market.  This could spill over into other commodities as well and be a spark for corn, in particular, which has a record net short for this time of year.  

With farmers undersold across old crop and new crop wheat, corn and soybeans, we can likely expect selling on major rallies, which will keep these markets choppy.

The cattle market created much excitement this week with Tuesday’s higher trade resulting in a breakout higher through the rest of the week.  March feeders traded above the 100-day moving average on Friday touching the 200-day moving average briefly before easing back slightly into the close.  However, it still closed above the 100-day moving average. These are the highest levels seen since early November.  

January feeder futures and options expired Thursday at 232.025 with futures contracts surging after the noon expiration.  
 

Cash fed cattle trade developed late in the week and showed packers getting aggressive after a lack of buying in recent weeks.  Live cattle futures also surged although still trading below key moving averages.  

Gaps are above on the feeder and live cattle futures and things look set to be heading to fill those gaps.  The now front-month March feeder gap will be filled at $245.375 and February live cattle futures gap will be filled at $184.900.  These can be upside targets if you’re looking for levels.  

The USDA will release its bi-annual US cattle inventory reports on January 31st that will help set the direction for this market and likely be supportive.  

If you have not protected cattle, we are getting closer to previous levels and time to do so.  With time nearing to spring contracts, premiums are less given less time until they expire. However, this market looks set to still move higher, but packer margins are thin at these levels and there is still some softness in beef prices and so be cautious.  

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. 

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