Howdy market watchers. Hope everyone had plenty of turkey and relaxation over the Thanksgiving holiday. It was indeed a different kickoff to the season with more remoteness than any of our families would prefer.
Yet it is 2020, so well within expectations. Many Americans took to the skies this weekend despite advice otherwise. Expect reports this next week of continued increases in COVID-19 cases that could weigh on markets. However, broader hospitalizations and rising death tolls were not enough to prevent another new record high above 30,000 on the Dow Jones on Wednesday. It is a tumultuous time for our country with much uncertainty ahead amid an untraditional presidential transition, a precarious Republican majority in the Senate and an economy at risk of coming under further restrictions as the pandemic expands.
Ag markets remain supported by pockets of dry weather, fund buying, a weaker U.S. dollar and strong demand largely from China. Monday’s $12.00 high on soybeans has yet to be retested, as Brazil plantings catch up with last year, as well as the average. Brazilian first crop corn plantings now are ahead of last year and the average. Argentine soybean plantings are slightly behind last year, but in line with the average, while corn plantings are right in line with last year, as well as the five-year average. South American weather will continue to be watched closely as fuel to sustain the bean rally. China demand is the other key underlying factor that came into question this week with order cancellations on Wednesday behind weaker futures prices. U.S. soybean exports this week were a marketing year low.
Markets were closed Thursday in observance of Thanksgiving with an abbreviated session Friday that closed at noon. January soybeans settled the week just below $11.92. First Notice Day for December grain futures is on Monday. This means that the December will be rolled to March contracts as the front-month futures. Watch for this and basis changes when you are pricing grain. December futures settled the week just above $4.25, while March futures closed just below $4.34, just below the recent double top at $4.35¾. Expectations remain for China to import a significant amount more corn as domestic shortages amid growing demand from pork and poultry production expose imbalances. Ukraine corn crop reductions have tightened exportable supplies, with Brazil lacking the phytosanitary certificates to export corn to China. The battle thus remains between the Ukraine and the U.S. Ukraine corn harvest is now 92% complete with expectations that final yields will be right in line with USDA estimates at 28.5 million metric tons versus 32.5 million metric tons last year. U.S. corn exports were solid last week led by Mexico and China, while wheat was at a marketing year high led by China.
While soybean and corn charts have been in a bull channel, wheat charts have been chopping sideways since the third week of October making lower highs and higher lows continuing to tighten the pennant formation. Friday was an inside day for KC wheat suggesting a breakout either up or down in the cards. Closing above the 20-day moving average to finish the week, other key moving averages remain below. U.S. winter wheat conditions on Monday slipped by 3% from last week and were 4% below expectations. Rains from central to northern Oklahoma to southern Kansas have helped improve crop conditions in those area, but southern areas and the northwestern third of the plains remain plenty dry with dormancy ahead. Dryness also has impacted wheat establishment in Russia. Colder temps in the next week across the northeast edge of the Russian wheat belt are cause for concern given limited growth ahead of dormancy and this cold snap. However, it is said to just cover 5% of the Russian wheat area, so widespread issues not expected. Dry weather impacting the Turkish wheat area also should add some underlying support. French wheat is off to a great start with 96% good-to-excellent versus 75% last year. Plenty of excess supply in the near-term and weak technical action on the charts should keep producers cautious about a breakout above the Oct. 21 high at $5.95 on July 2021 new crop futures.
The cattle market staged an impressive recovery on a short covering rally after last week’s three-day selloff. Feeder cattle achieved a four-day winning streak, but closed well off the highs on Friday with a shooting star-like formation. March feeders reached a high at $139.90 on Friday, just below the $140.00 recent high on Nov. 17. For now, the $140 level will serve as resistance. Live cattle futures pushed higher this week, but lost momentum on Wednesday closing lower that session as well as Friday. December fats settled the week $110.625. The $111.725 looks to be tough resistance for the December contract. Strong beef price trends should support cash markets going forward. The $110.00 area on the December charts are the cross section among the 20-, 50- and 100-day moving averages and needs to hold or risk further downside. Restaurant shutdowns could have a negative impact, although unlikely to be as severe as before given workarounds learned earlier this year. However, overall risk off attitudes that impact equities are likely to trickle down to the cattle market as well.
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 you’re still needing seed wheat of any variety to plant after sesame or soybeans, 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.
Sidwell is a Series 3 licensed commodity futures broker and principal of Sidwell Strategies. He can be reached at (580) 232-2272 or at firstname.lastname@example.org. 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.