Howdy market watchers! 

Time is marching on with half of November already behind us.  How quickly things can change with October being the hottest and dryest while this month is already the wettest with only two weeks in.  

The Grand National Quail Hunt Club hosted guest shooters from across the country in Enid, Oklahoma, this week to keep a tradition of fellowship and shooting game birds alive 57 years running.  It is a great tradition that highlights the preservation of wildlife habitats and conservation of our native grasslands while celebrating the heritage of our local communities.  
 

It was another busy week in the shifting landscape of US politics.  President-elect Trump has wasted zero time in taking control of the narrative in announcing choices for the various Cabinet positions and the newly-imagined Department of Government Efficiency (DOGE) that shares the acronym of a crypto-currency promoted by none other than Elon Musk, who will be leading or at the center of this agency along with former GOP Presidential candidate Vivek Ramaswamy.  

While nothing has been actioned as yet, there is speculation swirling about what the proposed Secretary’s leading the various government agencies will do if confirmed. Regardless of your politics, I think we can all agree that there is need for more efficiency in governmental functions. Just as businesses have to cut spending during tighter economic times and embrace new technologies to be more efficient, so too should our tax dollars utilize a constant review of how we do things and pivot when necessary to bring necessary functions into the present day.  However, deciding what is and isn’t necessary is unfortunately itself political.  

That is the rub that started to shake the seemingly limitless equity rally as the week progressed with analysts picking out stocks that may come under greater scrutiny from the newly proposed Executive Branch.  There are indeed some obscure choices that have created uncertainty as to what they mean for the future of government in every form and function.  

Countries around the world are also positioning themselves to be in the best position ahead of the transition.  For example, China just announced eliminating an export tax credit on the controversial UCO (used cooking oil) that was being imported into the US to take advantage of credits in renewable diesel.  While it is difficult to say if it was directly related to the US presidential election outcome, it is definitely just the type of policy that a Trump Administration would criticize as dumping and rightly so.  

The result was a rebound in soybean oil futures on Friday that lifted the overall soybean complex after a brutal week of selling pressure across grains and oilseeds.  This was after news earlier in the week that China could import 9.5 percent less soybeans this year due to softer demand among other factors.  
 

If I had to identify just one factor that caused most of the ag commodity selling pressure this week, I would say the surge in the US dollar. The US dollar index rallied to a triple top near 107.00 not seen since early and then late October 2023.  The index failed Friday to make a high above Thursday’s high, but did make a new low.  There is a chart gap all the way back below 104.00 that was created on November 6th, the day following the US election.  
 

So, what will make the US dollar index go back down?  Well, there are a number of factors, but one is easing monetary policy by the FOMC, which means interest rate cuts.  While more cuts are expected, the inflation part of the equation is not helping.  The jobs market has become a major focus for the Federal Reserve given inflation has moderated, but now declining corporate earnings and uncertainty before the election have resulted in companies shedding employees.  That is still a primary concern, but inflation could be at the cusp of rearing its ugly head again.  

October’s CPI was released on Wednesday this week and showed an increase of 2.6 percent over last year and 0.2 percent over last month.  Both figures were in line with expectations, but again show that inflation going lower has stalled for the time being.  Core CPI came in at 3.3 percent above last year and 0.3 percent over last month, but also in line with forecasts.  Time will tell with every incoming data point.  Without easing monetary policy, the US dollar could remain firm and keep downward pressure on commodities including metals.  

The one certainty we have as of late is volatility.  Watching markets of nearly every hour of every day, the magnitude of daily moves is incredible.  We’ve had days just this week were Bitcoin and natural gas were up 10% in just one trading day and crude oil, gold and silver were all down three percent.  One's outlook on a contract could be correct over a 3-day time period, but if you enter on the wrong day, you could be putting up margin to make it through such daily swings. 
 

Corn and soybean harvest are all but complete at 95 and 96 percent, respectively.  Winter wheat planting has also progressed to 91 percent complete although slightly behind trade guesses and the average.  Winter wheat conditions have also improved to 44 percent Good-to-Excellent, but in line with expectations.  There is more rain on the way early next week for the Southern Plains and it is just mind blowing how different the situation was just a couple weeks ago with exceptional drought.  

Various other wheat producing countries also shared more optimistic outlooks for wheat production this coming year.  The strong US dollar and more supply side headlines and lack of fresh demand news contributed to the heavy selling pressure on wheat this week.  Meanwhile, India’s domestic wheat price reached a new, record high this week on supply shortages and surging inflation climbing to a 14-month high in October.  We’ve heard about potential Indian wheat imports before and that headline would be welcome news to focus trade talk on demand amid the current landscape.  US corn exports however have been extremely strong already this marketing year.  

Wheat contracts came close this week to the August 27th lows, but so far have held above.  We need to start seeing upward momentum across the grain complex to help support wheat as it is unlikely to be able to do so under its own weight.  

Cattle, on the other hand, found sudden, strong support on Friday amidst an equity selloff.  Feeders, in particular, led the charge higher rallying over $4.00 per cwt on several contracts at the highs.  However, those highs failed to pierce the October 14th highs.  The next monthly USDA Cattle-on-Feed report is next Friday at 2 PM, after the market close.  If you’ve been buying cattle here after the recent rains, I think this is a good area to add protection.  Consider put options and LRP if you are still bullish, but would like to get some downside protection in place.  
 

Fed cattle contracts told somewhat of a different story with early strength nearly all fading by Friday’s close.  Fed cattle futures put in outside chart days, higher high and lower lows, but also closed in the bottom one-third of the daily range.  That seems to suggest weakness in my book.  Fed cash cattle trades reached $185 this week, down $5 from recent heights. 
 

The cattle complex continues to remain bullish from a supply shortage and strong demand, but uncertainty in the US political landscape that could result in a shake-up among some major sectors with heavy concentration of publicly listed companies could add downward pressure on equity markets more broadly.  

A few comments on cotton.  If you have unprotected cotton, you’ll have wished you would have added some protection. The volatile, but overall poor performance in the crude oil market, concerns about China’s economy and softness in equity markets have weighed on ICE cotton futures this week.  We are right near the August lows and the market looks week still.  Harvest is ahead of the average pace and there is a need for the demand picture to clear.  If you’re selling here, it could be the year to buy call options to re-own exposure for a rebound should it come.  
 

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.