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Sidwell Strategies Week-in-Review CommodityBuzz: Cold front to bring much needed moisture


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Howdy market watchers! The chill is in the air! And hopefully it brings much needed rain with it this time round. The freeze will definitely help relieve the remaining green from fall crops and bring harvest forward. Thanks to everyone who attended the Enterprise Grain sesame harvest workshop this week. We covered a lot of excellent, practical settings for combines and headers for sesame, soybeans, corn, milo and wheat. There are a lot of simple things to watch to maximize harvest efficiency and lower dockage. Overall, the US corn crop is 60 percent complete, beans are 75 percent complete and winter wheat is 77 percent planted. Snow and rain have moved across the Midwest this week slowing harvest that has helped support market prices with basis levels already firm. Well, its my anniversary weekend and so enough about the weather and Ill get straight to the markets or my wife may have other plans for me Wheat, corn, soybean and cotton futures all made new recent highs this week. KC wheat had mixed trade with the weeks highs on Wednesday followed by a key reversal selloff Thursday and lower high on Friday. Funds added nearly 6,000 longs to KC wheat up through Tuesday in Fridays report, 11,000 in Chicago wheat, nearly 48,000 in corn, 5,500 in beans and 5,200 in cotton. Weather is driving this wheat rally along with spillover from higher corn while China demand is driving the corn train and Brazil weather and China demand are continuing to prop up the bean market. Brazil weather is improving while precip chances are moving into the wheat belts of the world. This should have traders cautious on wheat while the bean strength continues to impress to the upside. With the election looming, the question remains how priced into this market are the adverse conditions versus just fund buying and how will the election outcomes on November 3rd, if we know by then, will impact those long positions. As we have all witnessed from the recent selloff in cattle, long liquidation can be quick and deep. Not to say the same could come to light with grains with real fundamental concerns around, but how priced in are even the most extreme conditions and are we already at levels to justify those issues plus overinflated buying by the funds? As November soybean options expired on Friday with the futures settling at $10.83 with a final, late session surge, those that had November protection, while it was probably at lower levels, no longer have protection. If you still have beans in the field, which most double-crop beans are, be sure you are aware of this and be cautious to let these elevated levels get away should fund liquidation take place before your beans are sold or protection extended on the January contract. With the frothiness in the grain markets, it is easy to get complacent at these levels. If you are above and even well above your break even levels at these price levels, take action. Do not let this great opportunity to get away from you. Consider going out to next harvest and the harvest after. There are a number of ways to take action and I can talk you through all of them even those that dont involve my services. There are ways to maneuver in every position to keep your options open. Remember that higher prices cure higher prices because farmers around the world will plant more when prices are higher bringing more production to the market. And I have already talked to several farmers that are buying more seed wheat as they are planting more acres than previously intended due to these price levels. Im guessing you are or know of neighbors doing the same. There is no doubt that pandemic concerns are likely going to result in additional inventory purchases by key importers and some untraditional importers to build buffer stocks, but we are not short of wheat in the world. Put options give you a floor, but allow you to sell physical at higher levels if the market goes higher. That may be the best approach in this bull market or if hedging here, buy call options or bull call spreads to protect the upside so that you can still sell at higher levels without margin calls from short futures offsetting those gains. If milo fits into your rotation, price protection here makes a lot of sense with new crop basis levels already firm and December 2021 corn futures at $3.94. If you missed out on the recent rally, there is plenty of next year to focus on and that opportunity is right here, right now. July 2021 KC wheat made a high Wednesday at $5.95 and settled the week at $5.85. Can the market go higher? Absolutely. If you are profitable however, consider protecting at least some of your bushels. This doesnt have to be an all or nothing strategy. If you typically have 50,000 bushels to protect, a 5,000 bushel contract is only 10 percent. Just give me a call to discuss strategy for your operation. Friday was also USDAs monthly cattle on feed report after the close. October 1st on-feed came in higher than expected at 104 percent of last year versus 103.3 percent expected. September placements were the big surprise coming in much higher than expected and in fact, the largest since 2011 at 106 percent over last year versus 102.5 percent expected. Marketings for September were also higher than expected, although to a smaller degree, but were the largest since 2003 at 106 percent above last year versus 105.9 percent expected. We will see Monday how much the recent long liquidation priced these numbers into the market. Cash trade was at $106 this week. December live cattle futures closed the week at $103.575. It was an inside day on the charts and so we will be watching for a breakout, either up or down, this next week. March 2021 feeder cattle settled the week at $125.525. Recent lows put in Monday were at $124.025. Demand for calves is expected to remain under pressure until the outlook for wheat pasture changes with more precip. If selling calves here, consider adding long call options to participate on the upside should this market rebound. 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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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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