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Sidwell Strategies Week-in-Review CommodityBuzz: Long liquidation in grains, cattle placements surge


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Howdy market watchers! Id like to start today reflecting on a couple souls we lost this week in two of our small farm communities. They were sudden and tragic and makes me think back to when I lost my father. We, the sons and daughters, of farm families are what keeps agriculture and rural communities vibrant and a way of life and I pray for these families and wish Gods speed to the sons and daughters as they strive to carry on the legacy, even if it is different in a way or few. In the markets, long liquidation was the word of the week and did it ever happen fast. Soybeans led the charge lower despite several indicators that wed be pushing higher that ended the monstrous $1.79+ rally since August 10th. November beans finished the week at $10.02 . Despite this being only 44 cents off the high, the rapidity with which it happened made it feel more extreme. $10.00 November puts were costing around $0.18 cents on Friday and adding or upping existing protection at these levels may not be a bad idea with these unseasonal highs and plenty of white space on the chart down to key moving averages. Hotter, dryer weather recently is starting to dry beans, sesame and the remaining corn down with cooler temps in store for this next week. We now have rain chances for Sunday, which seemingly appeared out of nowhere with this cool front originally being all cold, no precip. Rain is definitely needed as wheat planting gets well underway. Dryness in the US and the Black Sea region supported wheat last week, but rains in the Ukraine have mitigated some concern ahead of planting. After Tuesdays inside day on the chart and break lower Wednesday, the sell signal has been in place. Fridays weaker tone saw December KC wheat close below the 200-day moving average finishing the week just above $4.75. New crop July 2021 KC wheat finished the week right at $5.00 after Sundays overnight high of $5.29 . Fridays Commitment of Traders numbers reporting positions through last Tuesday revealed that managed funds added another 19,369 longs in soybeans from the prior Tuesday to reach 211,143 versus the record253,889. In soybean meal, 21,551 longs were added to reach 65,248 long versus a record 133,549. For corn, managed funds reached 95,912 net long after adding 37,356 long positions. KC wheat added 8,271 longs for a modest 18,463 versus the 73,111 record. The corn market held just above the 200-day moving average with an inside day. Wednesdays inside day was followed by a break lower on Thursday and further weakness could be expected with open harvest weather ahead. Despite average trade guesses for a one percent decline in Good-to-Excellent ratings, the USDA pegged corn at a one percent improvement to 61 percent G/E. As of Sunday, the US corn harvest was 8 percent versus 11 percent expected and 10 percent last year. US bean positions were steady at 63 percent G/E versus trade guesses of a one percent decline. A strengthening US dollar has put pressure on grain exports with Egypts recent tender resulting in Russia winning again, but with prices increasing $6-7 per metric tonne over the previous week. Despite this and while unexpected, it was a huge week for US soybean and corn exports. Trade expectations were already strong at 2.0-3.0 million metric tonnes and clocked in at 3.195 million metric tonnes. Market expectations for corn sales were 1.05-1.80 million metric tonnes and reached 2.139 million metric tonnes. Wheat sales were uneventful coming in within expectations. While these trade numbers were impressive for corn and beans especially to China, harvest pressure is taking center focus for now. Expect volatility ahead as these forces tug at each other as well as the Presidential Election nears with less than 40 days to go. Bottomline is that were off the highs, but be proactive at protecting your exposure, both upside and downside. If you havent locked in any physical, consider buying puts to protect your downside. If youve already locked in physical bushels or hedged here, consider protecting the upside with call options in case the funds get back pushing this market if yields slip and China demand jumps to a new level. Either way, I do not expect this market to remain here at this $10.00 level. We are 40+ cents off the high, but there is a lot that can happen in the next weeks and months that could take us to new levels or back to where we started. Give me a call to discuss strategies both producers as well as speculators as there will likely be plenty of volatility to trade. The next big report is USDAs much anticipated grain stocks and small grains summary reports on Wednesday, September 30th. This report will be the final adjustments to the 2019/20 crop year that saw record Prevent Plant acreage. That combined with the changes in 2020 including much lower ethanol usage, higher cattle on feed numbers and a recovery in China buying are all wild cards that the market will be watching as to how the USDA settles the debate. Wednesday will be a time to be active in the markets. The USDA released the monthly Cattle-on-Feed report after the close on Friday. September 1st on-feed numbers were higher than expected at 103.8 percent versus 103.3 percent anticipated. August placements were the big surprise coming in sharply higher versus expectations at 109.2 percent while average trade guesses were for 105.8 percent compared to the previous month at 111 percent. Coming in at 96.9 percent, August marketings were slightly higher than expected at 96.6 percent. Feeder markets continued to chop between the 50 and 100-day moving average this week with weakness Friday ahead of the report, down $2.00 per cwt across most contracts. September feeders futures and options expired Thursday and finished at $142.45. Cash fat cattle trade was firmer this week with select trade at $105 and one trade reported at $107. Firm packer margins are expected to keep cattle moving with slaughter numbers continuing around the 120,000 head per day. The $142-144 area look to be good levels to protect on feeder cattle. 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. 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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