Happy Halloween market watchers. That means November is just about here and the holiday season is about to begin.
The year has again flown by, but I think most of us can agree that we’re ready for the fresh start that the new year brings.
We’ve finally been blessed with some rain in the Southern Plains after a historically long and intense dry spell. It will take much more to restore our soils, and hopefully this is the start of a change. Unfortunately, NOAA still is predicting a warmer and drier forecast versus “normal” over the next three months, but we’ve seen weather forecasts wrong before. However, I would say it is time to build a crop and livestock strategy around drier conditions persisting.
Choosing crops, varieties and stocking rates that are fitting of drought conditions may prove to be an effective risk management approach itself in addition to price protection. Hope for the best, but plan for the worst as the La Nina is said to continue through February of next year. Generating revenue during drought periods is critical when crop insurance, while crucial, will only cover so much of your outlaid expenses. We are working with producers on a carbon program whereby you receive annual payments for implementing simple steps in your planting operation.
We have passed the deadline for winter wheat enrollment, but are signing up acres now for 2023 planted crops. Let us know if you’re interested to learn more.
It was a choppy week across markets with the U.S. dollar trading lower through mid-week followed by a two-day rebound. The Dow Jones was the clear winner finishing a six-day winning streak surging through and closing above the 200-day moving average on Friday, up 1,800 points on the week. Some call this a bear market rally and it may be so, but a rally it is. Talk of recession continues, as does speculation over the Fed’s pace of tightening. Core PCE, which is considered the Fed’s preferred gauge of inflation, increased slightly less than expected year-over-year at 5.1% versus forecast of 5.2%. U.S. third-quarter GDP increased 2.6% on an annualized basis, which was more than most trade expectations.
Exports climbed nearly 14.5% despite a strong U.S. dollar, while imports declined 6.9%. This was a positive sign, but nervousness lingers as Amazon projected poor holiday sales period ahead. Some foreshadowing of this concern came in the form of consumer spending in Q3, which accounts for nearly two-thirds of GDP, that increased only 1.4% as compared to a 2.0% increase in the prior quarter.
A resilient economy has sparked buyers in the cattle market. Live cattle contracts consolidated after Monday’s big bar up and finished the week with an inside day, lower high and higher low, on the chart. I believe there is more up in this market, although expect volatility. Talking with several cattlemen this week, there is rightly a bullish bias across the industry. However, when purchasing cattle at higher levels and feeding at elevated costs, there is less room to maneuver and time to recover should volatility strike. If grain markets dip, you can hold grain longer until prices recover. This is not the case in the cattle market.
Let us help you set a risk management plan that protects your downside while keeping the upside open. You can always put in place partial coverage to stay exposed to the market. We farmers are eternal optimists, but these times of headline risk in the markets should be enough to convince even the most risky and optimistic producers and traders to protect your price exposure.
Monday afternoon will mark USDA’s first winter wheat rating of the year. Expectations are for historically poor conditions of the U.S. wheat crop given widespread drought conditions. The rainfall received this past week in parts of Oklahoma, Kansas and Texas will indeed help, but also may result in the large number of acres dusted-in to require some replant. U.S. wheat planting now is 79% complete.
Despite these supply side concerns, weak U.S. export demand has put futures under pressure. The 50- and 100-day moving averages have been converging to a point of crossover that materialize on Monday. December KC wheat has been bouncing between these two chart indicators all week before closing slightly below the 50-day moving average on Thursday and then staying below it throughout Friday’s session to close lower at $9.25. The Black Sea grain corridor seems to be business as usual as we approach the renewal in late November. Rhetoric from the region was less active this week and will be needed for a resurgence in the wheat market.
Corn and soybean futures have been consolidating in a rather tight range this week with U.S. harvest progressing. Both corn and soybean harvests are well ahead of average. Soybean export demand has been encouraging, while corn has not. Soybean futures rallied in late Friday trading ahead of weekend elections in Brazil. This market could be a mover on Sunday evening as the votes are counted. This is another market where the 50- and 100-day moving averages are converging, likely around $14.15 which indeed may be a possibility this 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) 232-2272 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.