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Sidwell Strategies Week-in-Review CommodityBuzz: Bumper harvest in northern Oklahoma


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Howdy market watchers! Wheat harvest rolls on! Its been a full week of long days bringing in this years crop. There is no doubt it is a bumper crop in the northern part of Oklahoma. Yields have been solid, test weights phenomenal although proteins have been largely unimpressive. At our locations in Kremlin and between Nash and Pond Creek, I would venture to say protein levels have actually been improving on average as harvest advances. It has definitely been a year of extremes on the protein side, however. Weve seen levels as high as 14 percent and as low as 9 percent. There is also protein variability within the same fields with ranges of 10.5s to 12s in several instances. Test weights have been more consistent with our highest coming in at 66.2 pounds and nothing below 61 pounds. With bumper yields and lower protein, weve also seen basis levels as well as futures prices slip after Thursdays USDA report revealed a 28 million bushel increase in winter wheat production over average trade guesses, 25 million of which was hard red winter wheat. This resulted in an 11 cent loss in the July KC wheat contract on Thursday, but given the prior 4-day losses of 18.5 cents, we believe much of these higher yields were somewhat priced into the market. This was also evident from Fridays relief rally with July KC wheat jumping to a trading session high near $4.54 before settling back to finish the week at $4.48 , up 1.5 cents on the day. After Thursdays action pierced the bottom side of the bull channel that I discussed in last weeks article, the charts have turned negative for the time being from harvest pressure as well as record high world ending stocks. The wild card in this wheat market remains the fate of the European and Russian wheat crops with continued chatter that from traders that stress may be trimming these crops. Gains in Australia are also weighing on the market, but it is still very early and an increase over last years severe drought would not be difficult to surpass. Recent US dollar weakness and lower stocks from major exporters could mean the US becomes more competitive in the export markets, but it also depends on Southern Hemisphere and Black Sea outcomes. All in all, if you would like to lock in basis levels as well as the futures price on wheat delivered to the elevator, but also would like the opportunity to capture gains should the futures market rally, then consider buying call options to replace your physical bushels. Whether or not youre bullish the wheat market, this strategy affords the confidence not to miss out on a potential rally, but be able to stop interest and storage charges and lock in basis levels. As weve discussed before, this is also a more capital efficient approach as the premium for 5,000 bushels worth of at-the-money call options is less than 5 percent of the current dollar amount held in storing that same quantity of wheat in the elevator. Watch for Fridays lows to hold or risk down to the $4.40-level. The USDA left farmer wheat prices for the marketing year unchanged at $4.60. China was back in the market for beans this past week. Fridays move above the $8.83-level on November new crop futures was encouraging and could see a further push higher. The next level we need to break through is at $8.87 that could then see further upside. The corn market continues to chop sideways in a tight range, but still upward sloping. Managed funds continue to remain heavy shorts as weather continues to cooperate for the time being, but it is still early. For the meantime, corn will pressure wheat, but close attention will be paid to weather over the coming few months. The cattle market will continue to search for demand amid heavy supplies and with volatility returning to equities and coronavirus cases picking back up and protests, we expect cattle futures to remain under some pressure for the time being. August feeders settled the week at $131.00. A break through $130.00 and then $128.50 could see $125.00 or lower in the cards. Moves back to or near the $135-level may be worth protecting through the summer months. Give me a call at (580) 232-2272 or stop by our office to get your account set up and discuss strategies to protect your exposure to these markets. It is never too late to start and there is no operation too small to get a risk management and marketing plan in place. Remember, I am on-site at the Enid Livestock Market on Thursday, sale day although sales will resume in mid-July. Wishing everyone a successful trading week!

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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About the author


Brady Sidwell is the Founder and President of Sidwell Strategies, Enterprise Grain Company, Enterprise Grain Malt, Sidwell Solutions, Sidwell Seed, 81 Feed and Seed, Sidwell Transport, Arbitrage αlpha Solutions and co-founder of Enid Brewing Company. Mr. Sidwell is also a Limited Partner and member of the Advisory Board of Germin8 Ventures, a Food Tech Venture Capital firm based out of Chicago, and a founding partner of Ninja Ag, LLC, a precision agriculture technology business that creates variable-rate nutrient applications from corrected NDVI imagery. Mr. Sidwell was recently appointed to the Board of Directors of the Kansas City Federal Reserve Bank, Oklahoma City Branch.
 
Prior to his recent change in becoming an entrepreneurial business owner and commodity broker, Mr. Sidwell was Vice President of Global Strategy, Mergers & Acquisitions for the OSI Group, based out of its headquarters near Chicago. He first joined the company as VP of Corporate Strategy and Business Development for the Asia Pacific, Middle East and Africa (APMEA), based in Hong Kong. At OSI, Mr. Sidwell was responsible for spearheading global strategy and M&A.
 
Before joining OSI, Mr. Sidwell was Head of Food & Agribusiness Research and Advisory for Rabobank in North East Asia. He was responsible for cross-border F&A strategies for companies and investors across various sectors in the supply chain. While at Rabobank, Mr. Sidwell appeared regularly on Bloomberg, CNBC and Reuters TV to discuss the impacts of global and regional food & agriculture developments on Asian and global markets.
 
Prior to Rabobank, Mr. Sidwell worked on project teams at the U.S. Embassy offices of the U.S.D.A. in South Korea and Thailand. He holds a Bachelor of Science degree cum laude in Agricultural Economics with a focus on International Marketing from Oklahoma State University and a Master of Economics degree from the University of Hong Kong where he studied as a Rotary International Ambassadorial Scholar to China. Mr. Sidwell was raised on a family farming operation in Goltry, OK, where he lives with his wife Emily and their dog, Daisy. He is active in his community as a Rotarian, Ambucs member, Advisory Board and Investment Committee Member of the Cherokee Strip Community Foundation, Class 31 of Leadership Oklahoma and the Board of Governors of the Oklahoma State University Foundation.

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