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Sidwell Strategies Week-in-Review CommodityBuzz: Bulls continue running wild in grain markets


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Howdy market watchers! What a week! The bulls continue to roam wild in the grain markets while feeder cattle broke the 100-day moving average and pressed lower as the week progressed in the face of higher feed prices and dry conditions. Fund buying in anticipation of production cuts in Fridays USDA reports drove beans, wheat and corn to new recent highs and multi-year highs in the case of soybeans and wheat not seen since March and September of 2018, respectively on the continuation charts. As US farmers rush to get wheat dusted in before limited moisture traces evaporate in the southern plains, others are busy getting late corn picked, beans started, and sesame sprayed in hopes of accelerating the harvest window. At this stage of the moisture game, it is unlikely that many of these soybean and sesame acres will get back to wheat. However, being the first half of October, it is still relatively early with the crop insurance deadline for Pasture, Rangeland and Forage (PRF) to plant not until November 15th in the great state of Oklahoma. The deadline to report acres for annual forage for growing season one, which is likely to trigger in many counties, is October 15th and so if youre chasing those dollars, its time to get er done! In case I didnt get all that right, be sure to call Brenda and Bambi at Sidwell Insurance (800) 299-2408 to ensure you are qualifying for every dollar for which youre eligible. As we know, its not just dryness in the US wheat belt thats driving this market. SovEcon reported Friday that Russia could lose 10-15 percent of the 2021 winter wheat crop area due to drought in the Black Sea region. Should the lack of moisture continue through the end of the month, these percentages could grow. NOAAs 30 and 90-day outlooks across the US southern plains continue to show below average precipitation probability and above average temperatures. With such news, it may not seem surprising that the wheat market is on the rise and finally the KC futures are narrowing the gap with Chicago wheat. Despite this market remaining firm, these are price levels to be selling physical wheat in storage and locking in or at least protecting new crop prices that are near or above breakeven levels. July KC wheat this week peaked at $5.69 before settling the week at $5.54 . Theres no doubt that the bullish undertone in beans and corn have also lent spillover support to the wheat market. Despite these factors, there is no shortage of wheat with world wheat stocks up 22 million tons over last year. USDAs WASDE report Friday reported increases in Russia and EU wheat crops, an increase in Russia wheat carryover from last year, huge gains in Indian wheat stocks, while holding Australia steady and reducing the Argentine, Canadian and Ukrainian wheat output. Russia wheat export prices have been on the rise recently, but the weaker US dollar may not be enough to compensate for higher US wheat futures and rising production estimates elsewhere competing for the export business. Thursdays reversal was starting to show signs of this market topping. There are a number of ways to protect new crop prices and so give me a call to discuss the strategy that best suits your operation. Fridays Commitment of Traders report highlighting positions as of Tuesday showed managed funds continuing to add longs in all wheat contracts, beans and most dramatically corn with a weekly change of 27,646 contracts though still well away from record levels. Soybeans are within 15,500 of reaching the record net long position. Longs in soybean oil actually reduced this week while those in meal only increase longs by 4,068 contracts showing slowing momentum. While talking derivatives, we were surprised in Fridays USDA report that soybean crush numbers were kept unchanged given margins of over $1.00 per bushel in the upper Midwest. We expect this demand factor to be raised in future reports. There were a few other surprises in Fridays reports as well. Perhaps the biggest surprise from Fridays WASDE and Crop Production reports was 2020/21 soybean ending stocks that came in at 290 million bushels versus average trade guesses of 352 million and last months estimates of 460 million bushels. Production-wise, soybean, corn and cotton production were all down one percent from last year. Soybean yields were 51.9 bpa versus average expectations of 51.5 bpa, but unchanged from last month. Corn yields came in at 178.4 bpa versus expectations of 177.7 bpa and 178.5 bpa last month. While yield was higher than expectations, lower acres were the reason for lower production. Another surprise was China corn imports being kept unchanged at 7.0 million tons as well as production meaning no material impact from the storms. That runs counter this week to the USDA Attach in Beijing that estimated this week that China corn imports could surge up to 20 million tons in Tariff Rate Quotas (TRQs). The market will be watching this development closely as such a change in exports would result in a net decline in ending stocks and tighter stocks-to-use ratio that is nearing 13 percent. December corn closed the week at $3.95, up 8 cents on the day. November soybeans finished the week at $10.65 , up 15.5 cents on the day. The cattle market, specially the feeder cattle contracts, were the net loser on the week. November feeders lost nearly $4.50 per cwt this week with an even wider range to finish at $135.525 while March 2021 lost $4.00 per cwt to finish at $133.550. As we discussed in last weeks article, once that 100-day moving average was violated in the close, this thing was likely to fall apart. Live cattle held up better this week with cash bids remaining firm reaching $108-109 highs later in the week. December Fat Cattle futures continue to chop sideways, but in an upward sloping pattern. Christmas cattle closed the week at $112.60. Funds remain net long the Live cattle market though they reduced that position by 3,908 contracts in the week reported Friday. The concern now for feeders are dry conditions and producers holding off on stocking up on further head until more confidence is established that fall forage is going to be there. At our 81 Feed and Seed stores, weve had more customers calling in to change starter rations to grower rations with the expectation of having to dry lot calves for awhile. That is the current situation as it stands and until the weather forecast changes, markets and funds are going to continue to trade the stress. The US presidential election is 22 days away and there is no telling whats going to happen next with these two candidates and Congress still arguing over more stimulus. Farmers are thankful for the next round of CFAP that should start flowing soon as I discussed with Congressman Frank Lucas in Enid this week. Monday is Columbus Day, but markets will remain open. I will also be a year older on Monday and so forgive me in advance if Im a little slower come the opening bell 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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