Howdy market watchers!
History is being made as major world events continue to create jaw-dropping headlines. We will start today where we ended last week’s commentary with the developing chaos in the Middle East.
Israeli forces continue to exchange attacks with Hamas as the now declared “war” wages on and intensifies. President Biden was on the ground in Israel at the end of the week to demonstrate US commitment in defending the Iron Dome as well as humanitarian aid in the region. Meetings with other, more contentious leaders were cancelled in an act of defiance against any start to cease-fire talks that Biden hoped to initiate.
Meanwhile, the US House remains Speaker-less as other countries including China, Russia, Hungary and yes, the Taliban as the Afghan leadership, get louder at coalition building of an alternative world order outside the democratic principles long led by the US. China was the host of this platform this week for the 10th anniversary of the ‘Belt and Road Initiative’ (BRI) with Russian President Putin in attendance, marking his first foreign trip in many months.
The last time Putin stood shoulder-to-shoulder with China’s President Xi was at the Beijing Olympics just before Russia’s invasion of the Ukraine. It is anyone’s guess if there is another move about to take place by either side. However, this visit also comes at a time when both China and Russia are both in precarious positions at home and abroad. It is said that the “elders” in China are not fully satisfied with the current state of affairs in the economic turmoil domestically nor from the international conflicts Beijing finds itself in abroad, particularly and especially with the US.
The Russian regime celebrated the visit with overstated exuberance that the Chinese side did not echo as immediate in State media channels. A long-term grain deal between the two countries where China would buy 70 million metric tons of Russian grains and oilseeds over the next 12 years was said to have been signed, but again, there was no real official confirmation from the PRC. Regardless, to put these 5.8 MMT per annum exports into perspective, we believe Russia has shipped around 3.5 million metric tons of grain to China through the end of September this year compared to 2.2 MMT for all of 2022.
These developments do conjure up a paradigm shift for global commodity transactions that I’ve been thinking about recently. While there has been much talk about alternative currencies for trade, I believe we could see a period where certain countries begin bartering commodities that results in less price transparency and market-driven price discovery. These trades could be energy and grain for weapons or metals needed for weaponry or industrial purposes or infrastructure projects or simply “access.”
As we’ve foreshadowed in the last weeks, the grain markets finally found footing in this week’s trade. December corn futures traded above $5.00 for the first time since the 3rd week of August as did Chicago wheat above $6.00 since mid-September. If we can close above the 50-day moving average around $5.94, we have a chance at the $6.40 area I do believe. End-of-week profit taking took off the top end of the gains into Friday’s close. The US dollar has finally provided some temporary relief closing below the upward sloping trendline for the first time since it started in mid-July.

As heard in Chair Powell’s comments this week at the Economic Club of New York, the Fed remains hawkish as the labor market remains resilient despite slowing demand. However, soaring bond yields that breached 5 percent on Thursday, the highest level in 16 years, is also doing the job of tightening and may mean the Fed can pause again and potentially halt further rate hikes. This itself would help the US dollar remain soft.
US corn harvest is now halfway complete while soybeans are ahead 10 percent ahead of the average at 62 complete that typically indicates poorer yields. Demand is re-emerging across all the grain markets with already tight ending stocks gaining bias of further tightening.
A report out of the Ukraine this week summarized the damage of 17 Russian attacks on port infrastructure since July. A total of 300,000 tons of grain have been damaged at 150 port facilities and structures and reduced the Ukraine’s export potential for grain by 40 percent. An expanding conflict in the Middle East will likely spark wheat stockpiling and could extend and magnify a rally.
With lower global prices in recent months amid growing uncertainty, Egypt’s Minister of Finance this week indicated the possibility of “hedging the upside” in global wheat prices, which they have not done for some time.
The USDA released the monthly Cattle-on-Feed Friday, which came in more bearish than expected. October 1st on-feed numbers came in higher than expected at 100.6 percent versus 99.7 percent.

September placements dealt the biggest surprise coming in significantly higher than expectations at 106.1 percent versus on par estimates with last year at 100.8 percent. This was nearly 3 percent above the highest placement estimate. September marketings also didn’t do the bulls any favors coming in lower than expected at 89.4 percent versus 90.3 percent anticipated.

March feeders broke through the 100-day moving average on Thursday proceeding to lose nearly $7.50 per cwt in the two sessions ending Friday. The June 26th gap at $242.400 remains to be filled and is likely the next stop from Friday’s $245.725 close. November feeders could trade down another $5.00 per cwt.
The feeder charts did leave a small gap from Wednesday’s low and Thursday’s high, which the market will likely come back and fill, but it could very well be awhile.
In the last several months, I have been adamant about getting your cattle protected especially the ones you are buying at these levels. At that time, we were in a steady-go-higher environment. Now we are in a rare cattle market that is selling off. My advice remains the same. These are still good price levels and this market can and typically does stretch further than one expects.
The supply situation remains bullish without question and yet the market is plummeting. I don’t think the rally is over, but it is for now until the macro environment gets on a firmer footing.
Fed cash cattle had been quiet, but emerged strong late this last week. Trades at $184-185 in the south and $186-187 in Nebraska were confirmed. Live cattle futures closed at or just below the 100-day moving average. If the front-months break much below that level early next week, we could see further weakness. However, I remain more constructive the Live cattle futures than I do for feeders.
The feeder futures are more susceptible to weakness in the equity markets and we look set up for more liquidation in the major stock indices. It seems even more now than it did when I wrote last week that the markets are shifting to a position of back long in the grains and short in the livestock complex kind of feeling.
If you are looking for an alternative winter crop with a fixed price contract, Enterprise Grain Company has yet another new opportunity! It’s called camelina and is an oilseed that has the highest oil yield of any for producing biodiesel. There is high level and well-funded initiatives to produce Sustainable Aviation Fuel in the US. Traditional oil giants are largely leading this effort with Vision Bioenergy Oilseeds (VBO), the partner of Enterprise Grain, being a joint venture partner with The Shell Corporation. Enterprise Grain is hosting an information meeting on Wednesday, October 25th at 5:30 PM at Enid Brewing Company where VBO representatives will be present and grower contracts will be available to sign.
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.
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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 http://www.sidwellstrategies.com/disclaimer.
On the date of publication, Brady Sidwell did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.