Howdy market watchers! 

It was a historic week to say the least! Donald J. Trump was sworn in Monday as the 47^th President, only the 2^nd in history to serve two, non-consecutive terms.  With ag and equity markets closed in observance of Martin Luther King Jr. Day, energy and metals markets traded although with an early close.  

The world watched as US leadership changed and with it the ideology of policy priorities over the next four years.  President Trump spared no time in declaring a National State of Emergency at the southern border as well as for energy capacity.  The first plane load of illegal immigrants took off this week to Guatemala while natural gas export projects have been reauthorized. 

Speaking virtually to the World Economic Forum in Davos, Switzerland, President Trump challenged Saudi Arabia to lower oil prices to help end Russia’s war in the Ukraine that would reduce the aggressor’s funding source from oil and gas exports that have been elevated.  This would also have the effect of easing inflation at home that was another major priority of the Administration to address this week.  

There were then calls on the Federal Reserve to continue lowering interest rates, but of course that can only happen responsibly with easing inflationary pressures, energy being a critical factor in many aspects of prices in the economy.  

While tariffs were a central focus of Trump’s pre-inauguration agenda and indeed highlighted this week, they were not the first priorities post-inauguration, which was welcome relief to many markets.  Furthermore, tariffs on Mexico and Canada were discussed this week before any mention of China.  This was also seen as important and helped provide support to the soybean complex.  The creation of the “External” Revenue Service was announced to collect these taxes. In the end of course, President Trump did discuss 25 percent tariffs on Mexico and Canada and 10 percent tariffs on China.  

As you may have read, China has increased exports to Mexico in recent years, which in turn those products end up in the US taking advantage of friendlier terms between Mexico and the US, especially for important raw material items.  This new approach towards Mexico addresses some of this whitewashing as well.  

While China has been actively trying to convince the rest of the world that it will need less corn and soybeans from the world market going forward, they were back in the market for US corn this week.  China has long opposed GMO crop seed, at least in words, but now suddenly embraces them.  This was the case the entire time I lived there.  Like many things, they will only permit and promote these technologies once they have them to protect and meanwhile restrict and interfere with imports until such time.  That time has come, but it will still take time for this to make a dent in China’s insatiable appetite for feed commodities, especially given the structure of the majority of agricultural lands still occupied by smallholders.  

Another uncertainty that will likely play out in 2025 is how the Russia-Ukraine war will conclude and how that will impact international grain trade.  Already, all foreign grain companies have exited Russian ports while the state of Ukraine’s infrastructure will need investment.  There is suggestion that Russian claimed territories of Ukraine could remain with Russia in a truce, which Ukraine opposes.  Who controls the Black Sea ports will be a hotly contested question. Perhaps Trump has an idea for the US to be involved to add to trade leverage in regaining control of the Panama Canal. 

It was a cold week across the country and the surge in natural gas told the story.  In fact, it snowed in cities along the Gulf of “America” that very rarely if ever has seen snow such as NOLA and San Antonio.  In fact, grain companies instigated force majeure to halt loading of vessels due to snowfall.  These futures contracts are highly volatile and ended the week above $4.00 per MMBtu. Demand remains elevated with export opportunities reopening, but a turn to warmer weather could add pressure.  However, I would expect natural gas prices to remain firm and therefore, nitrogen fertilizer prices are likely to as well.  

Grain markets surged on Monday with a weakening US dollar and perhaps the so-called Trump bump.  Russian wheat exports have plummeted in January and forecast to be the lowest level this month since 2017.  Current production levels remain unchanged, but weather is less than ideal and we could see declines in the coming months.  

December new crop corn finally pierced the highs that were in place since last July around the $4.60 per bushel level, which is basically where we closed on Friday. November new crop soybeans finally made a high above the November 8^th high at $10.60 ½, but closed the week below $10.50 with some light profit taking.  Update your breakevens with current input prices and set some targets to lock in prices if triggered.  Trade disputes are likely coming that could apply downward pressure to prices barring any type of unpredictable weather event.  

All grains were under some pressure Friday from some end of week profit taking, but largely driven by Argentina’s temporary export tax reduction from 12.0 to 9.5 percent for corn and wheat and from 33.0 to 26.5 percent for soybeans.  There are also rain chances in Argentina ahead as well as in the US Southern Plains for wheat areas.  

If you’re looking for a crop to plant next month that harvests in May, consider camelina. We still have contracts available for $13.00 per bushel, herbicide tolerant varieties.  

While grains took the attention early in the week, it was the cattle market that made headlines to finish the week.  This week’s move in the cattle complex was unbelievable!  There is no other way to describe it.  

March feeders surged $6.00 per cwt on Wednesday while Feb fats traded above $2.00 per pound for the first time, but that wasn’t enough.  Markets continued to push Thursday into Friday with March feeders reaching a new, fresh record at $277.250 and Feb fats to $205.225.  January feeders are now just $2.00 higher than March feeders.  If you have January feeders hedged that expire next Thursday and would like to hold for a break, consider rolling to March feeders given that we’re almost to an even roll.  This spread has made tremendous progress this week.  

While Feb fats seem high, especially versus the April fats that traded to a high of $203.500 on Friday, cash fed cattle traded to a high of $208 in Kansas, $210 in Western Nebraska and Colorado and $212 in Eastern Nebraska.  The funds are very long the cattle market and now they are really pushing it.  When it turns, it could be ferocious, but when will it turn we are all asking ourselves.  

USDA released it’s monthly Cattle-on-Feed report on Friday after the close. January 1^st on-feed came in at 99.1 percent of last year, slightly below pre-report estimates of 99.7 percent.  Placements came in much lower than trade guesses at 96.7 percent versus 101.1 percent expected.  That is definitely bullish.  Marketings came in at 101.0 percent versus 101.2 percent expected.  Overall, the report had a bullish bias and we will have to wait until Monday’s market to see how much of this bullish expectation was priced into this last week’s surge.  

January is often the hottest market of the year and that seems especially true this year, but there may be more to come.  I spoke of $3.00 feeders last year and we could very well see that in the coming months. A strong economy and lower interest rates will continue to support the consumer.  It is the black swan headliner that I worry about and so should you if you have unprotected cattle.  Call to discuss options to protect a catastrophic loss, but keep your upside open.  

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.