Howdy market watchers! 

It’s less than 20 days until Christmas! Take time to enjoy this season by celebrating family and friends and the holiday spirit.  

I’ll be the first to admit, focusing so much on work that I probably miss a great chance to step back and embrace this special time of year to celebrate the season and life.  However, my young kids are changing that for the better.  There is nothing better than to witness the holidays through the eyes of a child.  Our distribution facility has become the home of the local Toys-for-Tots, which is a great way to give back to kids in your community if you’re looking for opportunities and there are many others as well including Fighting Childhood Hunger | Feed the Children.

Back to business, it was yet another week of geopolitical-packed headlines amid an equity market that again made new, all-time highs.  Exuberance is at its height with everyone trying to decide if it is rational or irrational.  As they say, the trend is your friend and so any breaks still look like good buying opportunities despite heady valuations.  

Corporate earnings continue to be released with mixed signals across industries and geographies.  Those that fall short of forecast are quickly penalized while others either maintain strength or climb even higher.  What’s going to give you ask?  It is hard to say.  

The CBOE VIX index, a measure of volatility expectations that can also be traded, is at its lowest level since mid-November and mid-July near 14.20.  For comparison, the VIX spiked above 37.00 in early August when equities markets plunged.  If you’re looking for a low margin opportunity to trade general volatility should the equity market ever go down again, the VIX between 12.0 and 14.0 is one to consider.  Call Sidwell Strategies to discuss entry points and make the trade.  

BITCOIN was said to finally trade this week above $100,000. I mentioned this a few articles ago as the BITCOIN futures contract traded above $100,000 for the first time on November 21st.  This week, the BITCOIN futures contract traded above $105,000 for the first time.  If you are interested to trade BITCOIN futures and options, consider Sidwell Strategies as we don’t just trade agriculture and energy futures and options contracts, but also metals such as silver and gold, interest rates and yes, even BITCOIN given it is now listed on the Chicago Mercantile Exchange.  

In other news, Friday marked the always much-anticipated release of the November payrolls update.  Hirings increased more than expected for the month at 227,000, compared to 214,000 additional jobs expected, with the unemployment rate coming in at 4.2 percent, which was as expected.  The largest sector for payroll increase was in heath care at 54,000, although this could be expected with Open Enrollment for health care plans this month as well as year-end renewals.  Leisure and hospitality were the next largest category, also unsurprising given the time of year.  

Tensions continue to rise in the Middle East and surrounding areas, with escalations in Syria returning to the headlines.  Foreign relations are a complicated weave with no right answer at present with much in flux as ideologies balance the ever importance of commerce.  The French parliamentary government leadership fell this week marking the shortest serving Prime Minister in the country’s history. 

Social unrest also emerged in South Korea this week, the world’s 14th largest economy by GDP, resulting in the president declaring martial law that was denied by their congress.  The president now faces the threat of impeachment.  Having spent much time in South Korea myself, I would be surprised if he survives this and expect we will see a constitutional leadership change coming soon.  

This is a time when democratic nations need to show leadership to the world rather than unrest as dictators and communist regimes are working in greater synchrony to control populations, trade lanes, territory and leverage over key elements and commodities. 

The US dollar index didn’t provide much help this week to the commodity complex although it did make a new weekly low and traded to the lowest level since mid-November.  There remains a probability of an interest rate cut at the next and last FOMC meeting of 2024 on December 17th and 18th.  However, there is still much to consider especially with the hotter than expected November jobs report.  All in all, the economy overall is trending rather well and so I would caution against overly aggressive cuts just yet for the greater good of course as we all would prefer a lower cost of money.  

There seemed to be a shift in the agriculture commodity complex this week with longs in livestock seemingly starting to switch places with the shorts in the grains. While the US dollar is still stubbornly strong, US grain exports have managed to maintain a healthy clip. China was back again to the US for soybeans this week as the Brazil soybean planting is all but finished as is the first crop corn with adequate rains.  China is notorious for cancelling bookings, but still they are on the books despite much talk of fewer soybean imports in the year ahead and greater cooperation with Brazil.  

US oilseed crush for October was reported this week coming in at a new, all-time record, up 5.4 percent over last year.  With southeast Asian palm oil stocks continuing to tighten and prices rising along with strong crush demand domestically among major oilseed exporting countries, we may have found a bottom in the global oilseed complex. 

The US decision for biodiesel in Sustainable Aviation Fuel (SAF) has been pushed to the Trump Administration and while the uncertainty is unwelcome, it is expected that the next Congress and Executive Branch will support.  USDA again revised corn for ethanol usage higher for the previous month, revising prior figures. Wheat, corn and soybeans had strong closes on Friday after a precarious week of critical lows just barely being held only to make solid ground on Thursday and make closes Friday above the prior day closes.  

While we live in a world of choppy trade, I expect we will see a rally in wheat, corn and soybeans next week.  USDA releases its monthly WASDE and Crop Production reports next Tuesday at 11 AM. We could see further fundamental support from that report to feed the grain and oilseed bulls next week.  

The wheat market had an extremely precarious week of all despite minimum export prices being announced by Ukraine and more time to consider Russia’s newly announced export quota that dramatically reduced wheat exports through next June.  However, US wheat conditions finished fall reporting strong with Kansas reporting one more week with an additional one percentage point bump to 56 percent Good-to-Excellent, the 2nd best of the last 10 years, and Australia reporting better than expected harvest and Argentina forecasting higher yields. 
 

US Southern Plains conditions have turned drier, but market bulls are focusing more on Russian crop conditions that were reported this week as the worst in 23 years.  Russia’s state weather agency reported the winter wheat crop as only 31 percent G/E versus 74 percent last year with 37 percent in poor conditions or not emerged.  Should we get the US dollar weakening further, I expect the wheat and corn bulls and to a lesser extent the soybean bulls to be on the run.  

That may come at the expense of the livestock complex despite overall bullish fundamentals.  Cash fed cattle traded to $191.00 this week, $1.00 higher than last week, but I’m not confident this week’s selloff was just temporary.  Weaned calves are absolutely on fire with some 300 pounders trading above $5.00 per pound this week and 500 weights trading above $4.00.  Monday was an outside chart day, higher high and lower low, but with a lower close, followed by an inside chart day.  Wednesday was a lower high and lower low that suggests further downside Thursday that did materialize, after Tuesday’s inside day.  Friday was another inside chart day and so I would expect Monday’s action will see follow-through in that direction next Tuesday.  

If you have bought cattle here, I cannot stress enough getting protection in place.  If you believe the market will go higher, buy puts or LRP to protect downside, but keep the upside open.  If you put LRP in place at a lower level, consider a bear put spread here to capture this additional push that is still $14.00 per cwt higher than where we were just one month ago.  

Seasonally, the cattle complex weakens starting in mid-December and while markets aren’t always predictable, it is that time.  At these price levels, protect and be glad.  Focus more of your attention on animal health and let the prices take care of themselves, but with pricing in place.  Keeping them alive is hugely important at these price levels.  

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.