Brady Sidwell (column mug)ENE

Happy December market watchers. Only three weeks until Christmas and four until we ring in the new year.

Do we all agree that fall went fast yet again? Perhaps because we missed the fall weather and went from the summer heat to cold only to moderate after. Rain chances return middle of next week with temperatures holding above freezing until later next week.

If you’re considering to apply topdress fertilizer to wheat that is emerged, ahead of this next rain may be the time for round one. This also is a good expense before the new tax year if needed. Now is an ideal time to consider your tax strategy with discounts available on pre-purchases of seed and chemical for 2023.

It was somewhat of a slow start to the week with post-holiday volume only getting back into full swing around Wednesday. However, that didn’t stop the headlines and volatility. Markets hardly know what to make of all the, often-contradicting, geopolitical headlines. News of escalating protests across China from the ongoing zero COVID policy and deaths in the remote northwest province of Xinjiang, where people died from a fire after being locked inside their apartments that fueled such protests brought about great concern to global markets to start the week. U.S. equity and energy futures plummeted, with crude oil selling off to its lowest level of the year.

Just as a technical sell signal on oil was triggered and it looked as if Monday’s $73.60 low on January crude was just the beginning, here came additional headlines to say otherwise. Monday’s range alone was $4.24 per barrel with a surprising positive close on the day. A prominent OPEC official then tweeted that the unofficial oil cartel was set to cut production in its next meeting on Sunday sent the market in a massive reversal trade for the following three sessions that took prices to the 20-day moving average at $83.34, just below the 50-day moving average. Quick math puts the volatility in perspective with front-month WTI crude oil swinging nearly $10 per barrel in four trading sessions.

A stronger than expected U.S. jobs number Friday brought back concerns that the Federal Reserve could bring about stricter monetary policy actions at the next FOMC meeting on Dec. 13-14. However, this came just a day after October’s core Personal Consumption Expenditures (PCE), the Fed’s preferred measure of inflation, came in lower than expected at 0.2%. Fed Chair Powell’s mid-week comments foreshadowing a 0.50% rate rise in the next meeting and potentially slower hikes going forward sent equity markets on an unexpected 750+ point rally despite being in line with prior, well-communicated forecasts.

The labor market continues to be stubborn for the Fed as seen in this week’s jobs report. Non-farm payrolls were expected to come in around 200,000 for October, but ended up at 263,000, resulting in an unemployment rate of 3.7%. Average hourly wages also increased 0.6% last month, which was double the estimate and increasing annualized numbers from 4.6% expected to 5.1%.

EU officials announced Friday a price cap on Russian oil at the equivalent of $60 per barrel. U.S. crude futures held steady and even positive upon the announcement Friday and then selloff over $1 per barrel through the end of the trading session settling below $80.00. It is difficult to say where this market could go next week. A price cap at $60 does not mean the global price of oil will drop to $60. In fact, there is some speculation that this could result in a major amount of oil and gas needed by the global market, especially now, being held from the allied importers. Frankly, it can be argued both ways, and we will just have to watch the technical closely to catch a move. Natural gas follows that path, but the magnitude of swings is much greater.

These macroeconomic figures have become extremely important to the agricultural markets. Perhaps the best news for the grain bulls this week was the break down of the U.S. dollar. In Thursday’s trade, we finally violated the 105 level. In Friday’s trade, we broke through the 104 level not seen since late June this year. With minimal exports taking a toll on U.S. wheat futures, a weaker U.S. dollar is critically important to our export competitiveness. Such news doesn’t feel so supportive if you look at KC and Chicago wheat charts. Friday’s selloff was aggravating considering global fundamentals beyond U.S. exports. However, the $8.60-level on now front-month March KC wheat looks to be support that this contract nearly touched Friday and managed to close 10-cents off from.

While there is always potential for further downside, the break lower in the U.S. dollar, oversold technicals and further declines Friday in the Argentine as well as Canadian wheat crop estimates likely are to bring some buying and short covering back into this market. Argentine wheat harvest is estimated at 23% complete with the spring said to be the driest since 1979 and the second-warmest November on record after a prolonged drought.

Corn futures suffered a steep selloff Friday, closing near session lows. There remains a gap on March corn at $6.38, which is around 8 cents below Friday’s close.

Crude oil action will factor into corn’s action as will Brazil weather, which so far remains negative for corn prices as do planted acres there. Agriculture Secretary Vilsack met with the Mexican President this week to discuss the rumored import ban on GMO corn. After further investigation, this is as I suspected. Apparently, it is the wife of the Mexican president who is passionate about non-GMOs. However, it is more for food corn than feed corn. Therefore, it is likely that any protectionism will be for white corn for food use versus yellow corn for feed use.

Brazil soybeans are 90% harvested. I believe rallies should be sold after Thursday’s 40+ cent selloff from the EPA’s disappointing RFA biodiesel forecasts and palm oils weakness.

The cattle market benefited much this week from weaker grains and a strong cash market at $155 in Kansas and $157 in Nebraska. Feeders closed above the 100-day moving average and traded above the previous, Nov. 21 high, which could suggest a further push to finally close the Sept. 12 gap that is $3 higher than Friday’s close. Having said that, we’ve moved $5 per cwt in four trading sessions and the market remains vulnerable to topping action. Live cattle futures traded to a new high Friday above the previous session suggesting that we could see more up come next week.

Come see me every Thursday sale day at the Enid Livestock Market and let’s talk markets. 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) 232-2272or 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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