Howdy market watchers! 

It is about to get cold, really cold! And that goes for all of us no matter where you’re reading from and natural gas has been responding.  In fact, everywhere but Florida will be experiencing below average temperatures this next week.  There are also chances of above average precipitation, but it definitely looks to be more cold than wet.  On Friday afternoon, President-Elect Trump made the decision for Monday’s inauguration to move indoors due to the frigid weather forecast. 


Just a reminder that ag markets will be closed Sunday evening and all-day Monday in observance of the 39^th Martin Luther King Jr.’s Day, but reopen for the Monday evening session, which technically starts Tuesday’s trade.  

There is much anticipation, but also market trepidation ahead of next week’s trade following the inauguration as bold campaign promises and fast-moving political appointments and the America First agenda are encouraging in ways, while concerning in other respects given the amount of change that could be coming over the coming weeks and months.  Markets responded positively on Friday to a call between President-Elect Trump and Chinese President Xi that didn’t lay out any specific points except that there was a call and friendly exchange and congratulations, which in itself is progress.  

China was an active buyer of US soybeans this week after last week’s friendly USDA supply and demand reports and higher prices.  The most active buying however is about to shift towards South America, which has started in Brazil.  While weather has turned more favorable in recent weeks in Brazil, drought and heat stress in Argentina has added risk premium to the corn and soybean markets. There is near-term rain in the forecast in Argentina, but then it turns back hot and dry as we get closer to maturity. 

US exports have strong for corn in these few weeks after the holidays and recorded a market year high at last reporting.  Taiwan also bought US corn this week.  Soybean and wheat exports were in line with expectations, but also firm.  With tariff talk softening somewhat, but still uncertain, a number of these purchases are likely being made in anticipation of a higher tax environment to come.  

After making a high Tuesday above the most recent November 8^th high, soybeans, as with other commodities, were under pressure from profit taking. However, markets rebounded with row crops in the lead.  Corn had the strongest showing with multiple contract closes right near Friday’s session highs.  December new crop corn is back to the 200-day moving average at $4.56 while November new crop soybeans are back to the 9-day moving average around $10.27.  There is still a chart gap on December corn that would be filled at $5.04 ½ back from December 29^th last year. Under the right conditions, it is possible.  
 

There is also a chart gap on November soybeans at $12.17 from the same date. That’d be quite move, but could be reachable depending on how the South American crop pans out and the battle for acres in the US this spring.  NOPA crush for December came in higher than expected and another easy record.  This insatiable crush complex could continue to support the oilseed complex, but policy for biodiesel is still in question until the new Administration is in place.

The US dollar dipped again this week with some softer CPI and PPI inflation data, but rebounded Friday.  On one hand, the US dollar is a safe haven asset for global investors, but also a proxy for interest rate policy on the other.  Given softer economies around the world, the safety net of the US dollar may outweigh potentially looser monetary policy that would otherwise allow some weakening of the index.  At the beginning of President Trump’s previous term, the US dollar began to weaken after his inauguration, but this time may not yield the same results. 

Overall, these first 100 days are going to be critical for companies and consumers to see how aggressive touted policy cuts are actioned and the market’s response.  One item of near certainty is that any items that didn’t get addressed this past Friday will be stopped and reviewed by the incoming teams before any moves are made.  The reopening of the US-Mexico border to live cattle imports was a particular item that I was unsure if we would see a decision before the weekend as January was thought to be likely timeframe.  However, I would now expect it would be several weeks if not months from now with the change of leadership.  

The same goes for biofuels.  An updated GREET model was released this week, but will also likely be revisited.  

Cold weather this next week could bring winter kill concerns for winter wheat especially with overall dryer conditions without snow cover.  This is also the case forecast for Black Sea wheat areas for early February.  

The International Grains Council joined the USDA and other country forecasters this week in tightening global supplies of grain for the coming year.  If ‘oats knows’, it broke higher on Friday after an inside chart day on Thursday, which suggests we should see further upside in Tuesday’s session.  

These higher grain markets have stalled the cattle complex.  While feeder and live cattle futures remain choppy with rebounds seeming to follow every selloff, Thursday’s weakness followed by Friday’s inside day on both contracts suggests a breakout could be coming early next week, either up or down. 

The cash market sure doesn’t seem to see any signs of slowing down with the high trade Friday at $204 in Nebraska. The lighter calf market continues to be on absolute fire.  We will have an updated inventory report at the end of the month with cash trade and macro headlines likely to dominate direction until that time.  

If you have been rolling the dice and have cattle unprotected, I would protect them, at least some of them.  The market is undeniably strong and seems resilient, but that can change in the environment that could all change next week.  January is often the high in the market.  Be vigilant and balance your risk taking by spending some on insurance with the hopes that the market is high enough and doesn’t require you to use it.  That of course is possible if the broader macro environment doesn’t create too much market uncertainty, which indeed seems possible with plenty of optimism around. 

There will be no LRP on Monday given the government holiday and so if you don’t lock in Friday’s offering by Saturday morning at 8:25 AM, the next opportunity will be on Tuesday afternoon for Tuesday’s CME market.  If you’re buying cattle here, be sure to buy them as healthy as possible as death loss is very expensive right now and it takes a hand full sold at these current margins to make up for every lost calf.  

Sidwell Strategies is the one-stop shop to protect cattle with futures, puts, LRP or a combination of all, which is probably the best strategy overall.  If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives.  Self-trading accounts are also available.  It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.  

Wishing everyone a successful trading week!  Let us know if you'd like to join our daily market price and commentary text messages to stay informed!

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 https://www.sidwellstrategies.com/fccp-disclaimer-21951.