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Sidwell Strategies Week-in-Review CommodityBuzz: USDA reports spark rally while rains needed in wheat country


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Howdy market watchers! October is here, but no break in the temps at least for now! We are indeed in need of precip as winter wheat planting progresses. Some farmers continue planting while others are holding out for a change in the forecast. Subsoil moisture remains decent but drying down fast with hot weather and the dreadful wind that defines this great part of the country although unusual for October. Producers are getting underway with harvesting soybeans while most are still a couple weeks away. The number of wheat acres planted this year would be a wild guess at this point given the acres of late beans and sesame coming off, which may or may not have leave enough time for late wheat seeding. And no doubt that decision will also be somewhat determined by the price of July 2021 wheat futures at that time that closed the week at $5.31. Keep vigilant for fall army worms that weve heard reported in a few areas though admittedly not many as yet. Hopefully, they hold off and stay away for wheat pasture to get established. Weve been working with clients this week to extend new crop protection at these levels after Wednesdays spike on the release of USDAs grain stocks and small grains summary reports. The biggest surprises were downward revisions in corn and soybean stocks that were the 2nd largest declines at the end of the marketing year over the last 13 years. For corn, stock levels were 250 million bushels below average trade guesses whereas for beans, USDAs numbers came in over 50 million bushels below average trade guesses. Wheat stocks also came in 75 million bushels below average trade guesses. Winter wheat crop production also came in below USDA August estimates as well as trade expectations and was the lowest number in 10 years partially offset by increases in spring wheat production. These figures had managed funds holding and adding to longs and the markets on the move. In a rare move, the USDA also revised last years production with soybeans unchanged from prior estimates, but lower than expectations while corn was higher than previous estimates and higher than average trade guesses. For the day, December corn jumped nearly 15 cents, November beans up 30 cents and December KC wheat up an impressive 34 cents. High-low ranges were even wider. While corn and wheat made new recent highs, soybeans were unable to eclipse the $10.46 high from September 18th. Wheats major move was supported by continued dryness in the US and Russia as wheat planting continues with a dry forecast ahead. Were hearing that of the Russian wheat belt is short of moisture ahead of dormancy which may result in added winter kill concerns. Frost concerns in Argentina also have added buoyancy. In Fridays Commitment of Traders report that marks fund positions as of the prior Tuesday, soybean longs had added 17,900 contracts to reach a net long position of 229,043 contracts versus the record long of 253,889. Managed fund longs in corn increased 10,908 contracts to reach 106,820. The KC wheat managed fund position declined slightly by 438 contracts though still holding a net long position at 18,025 contracts. Soybean meal contracts also added longs while canola continues another week at a record net long position. Oilseeds recently have been on fire helped along by strength in Asian palm oil prices. With China being on National Day, Mid-Autumn Festival and Golden Week holidays until October 9th, we are expecting purchases to be slower. However, and as observed on previous holidays, China did announce a purchase of 264,000 metric tons of US soybeans on Friday. RJO analysts are expecting higher export demand for corn driven by China that should tighten the balance sheet further, but that also all depends on where yields come in this year. With open weather ahead, one would expect harvest pressure and farmer selling on the recent rallies to soften this market. Fund positions however need to be monitored as they are driving much of this market for the time being. For the week, December corn closed just below $3.80, November beans at 10.20 , December KC wheat at $5.09 and July 2021 KC wheat at $5.31. While these markets seem to have a bullish undertone and hanging in these elevated levels, these are still good levels to be taking action on cash sales and new crop prices. Be cautious not to get complacent. Calculate your break-evens and if you can lock in a profit here, get started doing so. However, I would also advise having an options strategy ready to take advantage of moves higher should these markets leg higher during such uncertain times ahead of the election and fund buying. This can be vital to a successful marketing plan that allows you to be nimble and move with the markets while continuing to manage price risk and not just holding out waiting for higher prices that often has disastrous results when done without a strategy in place. We have been making a lot of moves lately given the volatility and I expect there will be plenty to come. If you are interested to learn more how to fit a pricing strategy into your operation, please get in contact with me and lets get started. This market may continue consolidating until the next USDA monthly WASDE and Crop Production reports are released on Friday and so there is plenty of time to review your approach to current crop sales and locking in next years production. The cattle market this week continued to trade in a range with feeder contracts bouncing between the 50-day moving average above and the 100-day moving average below. While the trend remains in a sideways, but upward sloping pattern, it looks much like the equity, namely the Dow Jones, charts chopping sideways awaiting a direction from Congressional noise ahead of the election and uncertainty over additional stimulus with the focus remaining more on positioning candidates than getting anything done. No doubt Fridays headline that the President and First Lady tested positive to COVID complicates the outlook with less than 30 days until the general election. This pressured oil and equities on Friday though equities recovered well off the lows into the close. October Feeders settled the week at the 100-day moving average of $139.90, which Im positioning to ride back up, and March finished the week at $137.425. Fat cattle trade has been firming as of late with plenty of $107 deals done in multiple states. October Fats settled the week at $108.15 while December finished up at $111.175 and so the futures remain at a slight premium to the cash. Managed funds remain net long the market adding 4,925 contracts this week for a net position of 62,924 versus record long of 154,550 contracts. USDA boxed beef cutout values have been on the rise lately and are the highest theyve been since September 25th. I would advise protecting Feeder cattle prices at the 50-day moving average and using options to trade the volatility that is likely to continue until the election. 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. If youre needing seed wheat of any variety, be sure to call Sidwell Seed at (580) 874-2286. We have a wide variety of bulk and bagged seed including WestBred, Limagrain CoAXium, OGI/OSU, Agri-Pro and KWA with multiple pick up points in Kremlin, Goltry and in bags at 81 Feed and Seed in Enid and Medford with advance notice. 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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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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