Cereals consolidate as livestock increase | Ag / Energy

Happy beginning of Thanksgiving to you and your families, market watchers. That’s right, the holiday season is pretty much here.

Did you know that the world’s largest freshly cut Christmas tree stands in downtown Enid, Oklahoma, and that it will “light up the plains” next Friday night after Turkey Day?

With a shortened holiday trading week next week and a shortened Friday session with noon closings for agricultural markets, expect liquidity to decline by Wednesday at the latest. Note that Friday is also the expiration day for the December wheat and corn options. In-the-money options will be exercised on December futures after Friday. The first notification day for December futures contracts is November 30, which means long futures will have to be carried over to March before that date or risk delivery. It also means that spot bids will shift to March futures contracts, possibly by November 24, and therefore base bids will adjust accordingly.

March KC wheat futures are only 4 cents higher in December and only a penny higher in May, meaning there is basically no incentive to haul wheat given the current strong demand. . KC and Chicago December wheat futures hit new highs recently on Thursday morning before closing negatively that day. This market is consolidating as the US dollar has remained firm and US exports in line with expectations, but overall not very impressive. However, import demand from North Africa remains strong as global stocks continue to tighten as EU export projections were lowered this week. Dry weather in the United States continued to stress some areas ahead of dormancy and further planting, although good to excellent conditions improved slightly this week by 1% from last year and above. 46% expectations.

Inflationary concerns continue to attract more foreign money into agricultural products, with wheat being the benefactor of late. The adoption of the “Build Back Better” infrastructure spending plan will only add to these inflationary concerns. We expect this to continue in the coming weeks until the Federal Reserve takes the much-anticipated step-down action, along with the announcement of the new Fed chairmanship, which is expected next week before Thanksgiving. .

I think we will have to see the corn market increase for the wheat market to extend its gains. While I think it is possible for this wheat market to break above the $ 9.00 level and even hit the $ 9.20 to $ 9.50 area, it is unlikely to happen at the same time. , so beware of greater volatility here. July 2022 KC wheat closed the week at $ 8.25 ½ after a high of $ 8.38. The corn market also consolidated this week, failing to hit a new high. December corn futures ended the week at ¾ $ 5.70.

Soybean futures got the best of the grain complex this week, with the January contract hitting $ 12.89 ¼ before ending the week at $ 12.63 ¼. This puts soybeans from the November 2022 new crop at ¼ $ 12.50. It looks like there is potential for this January market to hit $ 13.00, but this will also serve as a high resistance level. Soybean acreage is generally expected to be higher next year due to high fertilizer prices and soybean nitrogen fixation capacity, reducing nitrogen requirements relative to But. However, I also think the Chinese are underbought on soybeans as they expected this market to weaken after the latest USDA report. As a result, we will likely see an intensification of purchases from the world’s largest importer, as we saw last week. Malaysian palm oil prices also rebounded this week, showing greater strain in the export market. The core offerings of processors in the United States have really strengthened lately, reflecting the demand for products.

The soybean harvest in the United States is now 94% complete last Monday with corn at 91%.

The 4% drop in oil prices this week hit a six-week low amid new concerns over COVID and continued calls from the Biden administration to take action to mitigate the rise in gas prices. On Friday, crude oil prices broke the 50-day moving average to close the week near the $ 76 level not seen since October 7. If we fall below $ 74.50, we’ll likely sell at the 100-day moving average at $ 73.30. However, a continued decline in oil will not bode well for the corn market, as ethanol demand is likely to decline. Therefore, watch this energy complex for clues about the grain market.

Natural gas prices continue to show an inverse correlation with oil prices. As crude fell, natural gas rebounded, maintaining the 100-day moving average. The colder weather is expected to see natural gas prices rise and continue to provide underlying fertilizer support into the new year.

Once grain markets calmed down from Thursday’s highs, the cattle market was finally relieved. Feeder cattle contracts traded above October 27 highs and closed above the 100-day moving average for contracts in March and beyond. November feeder cattle futures and options expired on Thursday just below $ 156.00. With spot fat cattle trading at $ 134 last week, live cattle futures have also hit unprinted highs since early September. The USDA monthly feeder cattle report released Friday at 2 p.m. after the close went relatively smoothly. The November 1 figures were 99.8% in line with expectations. October’s investments were slightly above expectations at 102.4% versus 102.2% expected. This number was considered a bit higher given that last month’s much lower placement number of 97.1% was considered exaggerated. October marketings were lower than expected at 95.5% vs. 96.3% expected. The number of marketers was really the biggest surprise, but I don’t see that dampening this recent market strength. While it is also prudent to protect the decline, I think producers should be looking to hold the rise until late spring. I think we might see a $ 180 print on the feeders in the New Year.

Protection against Animal Risks (PRL), which I also offer through insurance, in addition to puts and covers, is a product to be closely considered this year. This is basically a subsidized put option, but there are other differences as well, including the option to pay the premium after the coverage expires instead of upfront. If you are ready to trade in the commodities markets, call me at (580) 232-2272 or drop by my office to create your account and discuss risk management and marketing solutions to further your goals. Auto-trade accounts are also available. It’s never too late to start, and no operation is too small to implement a risk management and marketing plan. Come see me every Thursday during sales at the Enid cattle market and let’s talk about the markets. I wish everyone a successful trading week.

Sidwell is a licensed Series 3 commodity futures broker and director of Sidwell Strategies. He can be reached at (580) 232-2272 or [email protected] Trading in futures and options involves risk of loss and may not be suitable for all investors. See the full disclaimer at http://www.sidwellstrategies.com/disclaimer.

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