Are commodities set for a bullish 2026?

Howdy market watchers! 

Well, we have just about made it to the end of another year!  Rough, rocky or wild, we have survived.  Now it is time to reflect on another trip around the sun and what we could have done better, but also counting of all the blessings, earned or otherwise.  

It is also the time to be optimistic as we start a fresh, new year ahead with a clean slate and elevated objectives.  While it is entirely your perspective and a mental exercise, take this opportunity to really make the changes in your life in the year ahead to achieve happiness.  Success is all what you make it out to be, but increasingly, success is a matter of balance and not just what’s in your bank account.  Embrace the small things in life and you’ll likely find that happiness and money will follow.  It is harder than ever to control the environment around you and so enjoy the ride as we never have enough “time,” the most valuable commodity of all.  

Having said that, it actually may be metals that are the most valuable commodity you or your family has stashed away.  This year’s move in metals not to mention the move on Friday alone has been phenomenal.  On Boxing Day alone, silver jumped nearly 10 percent, palladium up 13 percent, platinum up over 10 percent, copper up nearly 5 percent and gold was up nearly 1.5 percent! Just when one thinks we are due for profit taking, it makes another leg higher.  

Interestingly, the stock market, in a general sense, also continues to perform, which is unusual when metals are surging as such movement often suggests broader economic weakness.  However, we are likely in an interim period where the AI trade is pushing the major stock indices higher while labor market weakness is increasing the odds of rate cuts and a weaker US dollar due to those rate cut forecasts are boosting metals as is the underlying sentiment that US monetary as well as fiscal policy is going to get looser and debase the intrinsic value of the US dollar-denominated, global economy.  

There is also the fundamental side of several of these metals that are changing as global EV mandates are being scrapped.  Ultimately, I believe this surge in metals is foretelling a concerning outcome to the strength of the underlying economy and spending power of average consumers.  It is also though making a case, at least in the short term, that we could see a general boom in commodities that could and should include agricultural commodities.  

Fundamentally, agriculture balance sheets are somewhat tight, with the exception of wheat, but even fundamentals are strengthening for wheat with continued Black Sea tensions reducing exports from the region, importers stockpiling due to geopolitical constraints, dryness in the US southern plains wheat belt and now Argentina, not to mention inflationary pressures.  We are also hearing of a lack of milling-quality wheat, which we are beginning to see in the fact that KC wheat is finally trading at a premium to Chicago wheat.  

However, wheat is one of the trickiest commodities to trade.  I say this from experience.  We are in the middle of wheat country and so many clients want to trade wheat, but inevitably it seems there are always more sellers than buyers, yet farmers are always bullish wheat!  As my dad always said, “wheat has 9 lives”.  Just when you think that drought and disease have wiped out a wheat crop, it rains and the crop bounces back to produce record yields and higher protein from the stress that you once thought would kill it.  

Also, nearly every country in both hemispheres produce wheat for export.  Therefore, it is always available on the market.  It’s nothing revolutionary, but this all means that when wheat spikes, it should be sold.  Wheat is also consumed widely around the world and so demand can be relatively stable when production concerns mount.  Again, buy the rumor and sell the fact as on any major spike in wheat futures, we are just that much closer to it all being just fine.  Now, that’s easy to say, but difficult to time.  

I believe we could see some more upside in the wheat market in the near-term, largely due to the tensions between Russia and Ukraine likely to see any resolution with current dialogues and actors.  The 6-10 day and 8-14 day outlook from NOAA says that the entire United States should expect above average rainfall.  This will be a spoiler for the wheat rally if it comes true and if Black Sea tensions simmer.  KC wheat made a new, daily high above the prior day’s high on Friday, but Chicago wheat did not and made a new, daily low.  This bull will continue to need to be fed as they all do and so we will need fresh news from the Black Sea and continued dryness or a major rally in corn to keep this rally on the move higher.  

We are up against some key trendlines, but I believe that $5.43 for March KC wheat could be in the cards, which is the 78.6 percent retracement number.  At that level, I would be taking action to protect the long side with short call options or simply exit longs.

March corn and soybeans posted new, daily highs on Friday, but closed well off those highs and in fact, near the lows.  It was a low volume trading day, but we need more export news to drive these row crop futures.  China has suspended local soybean auctions due to limited demand, which is not a good bull-sign for soybeans.  However, we’ve made a healthy correction and I could still see soybean futures rebounding, especially if we could get some upside help from wheat and corn and of course, the ole January bump.  

It is not often the case that you see the grain and the cattle complex rallying at the same time.  However, we’ve been seeing that lately.  In my opinion, the cattle complex still looks good to the upside.  Only January feeders have filled that large gap from October 24^th with March feeders to fill its gap at $345.050.  I think we could see that as early as next week.  

Despite the shortened trading week with markets closing early Wednesday and all day Thursday, we did see fed cattle cash trade up to $230.000, which was higher than last week and matched the prior week. The CME Feeder Cattle Index reached $354.000, but will be lower due to fewer sales as auction barns across the country are closed due to the holidays.  January is often the strongest month in the cattle market and I think we could see that strength in numbers next month and very possibly make trade to new highs in the futures market.  That may be a tall order, but I think it’s possible.  

Expect an announcement anytime of the US-Mexican border starting to reopen in a limited faction, but I’m not sure this market will even sweat it after all we’ve been through and the limited impact on cattle supply with the level of demand against the historical shortage.  

US 3^rd quarter GDP came in this week stronger than expected at 4.3 percent versus 3.2 percent expected, the strongest growth in two years.  However, inflation is also up, which would increase GDP, but not up as much as GDP.  President Trump has touted his policies for the better than expected results, but time will indeed tell.  There is more riding on the US mid-term elections than can perhaps be calculated and at a time when US voters are more stretched financially and more uncertain than ever about the path to bettering it.  

Thank you for following us throughout the years as we share our view of the markets and the economy overall.  I would love to hear from you as many of you have reached out as it keeps me motivated for the year of market watching and non-AI writing!  Happy New Year to all of you and your families!

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.