Happy New Year ahead market watchers!  

And what a year it’s been.  There are always ups and downs in the marketplace, but this past year has seen some wild extremes with highs and lows oscillating with greater frequency.  We’ve experienced plenty of whipsaw moments where, overall, equities, cattle and the US dollar are much higher and grains are much lower, at least for now.  However, it does indeed look as if grains are bottoming and beginning to turn the corner. 

We’re seeing double-to-triple bottoms across the wheat complex with well-ahead, taking the lead busting and closing above the 200-day moving averages and the October highs.  I’m looking at $4.60 as the next resistance level on March corn that closed Friday at $4.54.  European Milling wheat started Friday’s session lower trading all the way down to the 100-day moving average before surging higher by the close tying the December 24th session high and closing just one-tick off that high. Such chart action is indeed bullish and just short of an outside, reversal day.  

While net shorts have been moving only steadily to cover positions amidst US dollar strength that continues and now at the highest level since November 2022, the Russian wheat crop and export “quota” continues to shrink.  This week, IKAR was the latest Russian agency to lower wheat export ideas for the coming marketing year to 41.0 million metric tons (MMT) versus SovECON’s 36.4 MMT and USDA’s last year estimates of 47.0 MMT. Rosstat, Russia’s official agricultural statistics agency, estimates this year’s wheat crop at 82.0 MMT, in line with USDA, and 10.0 MMT below last year.  Regardless of who is guesstimating, production is going to be lower as will exports, especially given high inflation domestically.  

Global wheat demand has also firmed.  Algeria tendered for a large order of wheat this week that was originally thought to be over 600,000 metric tons with rumors up to 1.1 MMT with higher prices versus recent sales.  US wheat sales also topped expectations this week and registered 25-week highs while corn sales where higher than expected.  

The waffling soybean market saw lower than expected US export sales this week after heavy orders in recent weeks, but should continue to find some support from developing soyoil demand from the sharp reduction in global palm oil stocks.  US soybean oil sales were higher than expected as were soybean meal sales. With China’s sow herd finally starting to rebound in November, we should see some more buying across the bean complex even if not US origin.  

Observing the soybean chart, it seems that more favorable weather in Brazil ‘is’ largely priced in to the market.  Argentina is now turning drier for the outlook and any change in Brazil’s forecast could spark a meaningful rally in soybeans.  As others have said, we could see a soybean rally through Martin Luther King Jr.’s birthday in mid-January.  

This is the time of year where low volume can increase market volatility with fewer physical traders at their desks.  If there is anything certain about these times in which we trade, expect the unexpected. There is much optimism among the business community for the incoming Trump Administration.  However, there is also some fresh uncertainty, especially after the recent debt ceiling debacle among other headliners, that the clean GOP sweep may not be all roses.  

Biofuels seems to be up against a precarious position with a strong agriculture lobby and pro-petroleum Trump weighing where taxpayer dollars should be spent amid harsh rhetoric of government efficiency.  It will likely all boil down to tax strategy.  

Regardless, the US needs to be exporting energy in my opinion.  Natural gas is the lowest hanging fruit, but I believe that biofuels could be a major opportunity for US farmers as well as the energy industry. The tariffs potentially facing US agriculture are causing uncertainty in the markets and among farming families, but I do believe it is a means to an end that will hopefully end before implementation.  Pressing the national agenda sells, but ultimately for agriculture, we’re in a global market and it needs to remain as such.  

The market that seems to be unbreakable is the beef complex.  There is global demand and where prices are getting high, there are newer markets that lack product quality with high domestic prices and strong demand that cannot resist the urge.  China did launch a probe this week into beef imports as competition with high priced domestic beef pressures the local industry.  However, this is likely, as per usual, just a tactic given the tariff rhetoric on the horizon to have some easy bargaining chips as China’s domestic beef industry will never compete, as I have seen firsthand.  

Simply put, the beef market is ON FIRE!  Managed money funds have weathered the recent selloff and are back in buying mode.  Despite the large net longs in the market, we could keep pushing higher even in the midst of shallow corrections in the equity market, as we saw Friday.  Cattle are costly, but fed cattle cash trade that topped out late Friday at $193 in Texas and Kansas and $196 in Nebraska, keep optimism and hedging prospects high and profitable.  

If you’re trading cash, the market may be steady and strong.  Feeder and fat futures were strong this week, but with uncertainty in the markets, I would not expect the same steady strength from futures. This makes it difficult for the risk manager, but be cautious here.  Put options and LRP protect the downside for a premium, but keep the upside open.  

If you’re confident this market will just keep working higher, you may be right, but don’t be surprised if you wake up one day or week and the market is down $25-35 per cwt.  If that’s stomach-able, then there’s scope to let it ride.  However, death loss matters more than ever at these prices and so don’t underestimate this in your breakeven as it drastically changes the numbers.  Buy stockers followed by buying a put option or LRP and keep those cattle alive.  If you have the grass, hay, knowledge and patience, buy as many calving heifers or cows as you can and keep them healthy. The market is waiting for you and this is the optimal time to get involved.  

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.