Howdy market watchers. February is just about here and the headlines of the day are far from what we could have imagined.
A failing brick-and-mortar video game retailer, GameStop, became the talk of financial and mainstream news and the source of nearly $20 billion in losses by short seller hedge funds, year-to-date, at the hands of individual retail investors organized through Reddit followers. The short squeeze spilled over to other stocks and likely is to see continued presence until this frothy bull market sees a meaningful correction to wipe out amateur traders. For now, it is game on and everyone is starting to be active day traders. Word to the wise, nothing is free in this world, including commissions on trades. If you believe the actively marketed zero commission trading platforms, know that there is more to the story, which this kind of market environment will reveal. Be cautious and work with trusted brokers with respected clearing firms to avoid unnecessary restrictions and roadblocks at the most critical times.
It was an active week in ag and energy markets with big moves in grains and cattle. China was back in the market in a significant way purchasing U.S. corn and soybeans. Was this a diplomatic move or one of necessity? Probably both. Just as the Biden administration is getting his cabinet seats picked and confirmed by the Senate, his policy initiatives are emerging. Talk of defending Taiwan’s democracy and addressing human rights issues of ethnic Uighurs in northwest Xinjiang Province with the State Department calling it genocide by the Communist Party, President Joe Biden has sensitive topics to navigate with an important buyer of agriculture products.
After four consecutive days of China corn export purchases from the U.S. totaling nearly 5.85 million tons, corn futures pushed to fresh recent highs above $5.50, trading a weekly range of 62-cents. Friday’s late-session break above the previous day’s high at $5.50½ that had been an inside day suggests more up. Barring other factors that change the current scenario, it looks like $6 March corn is in the cards. As of now, Brazil’s safrinha corn, which represents 75% of total production, may be planted late and exposed to summer heat and dryness in February. December new crop futures closed the week at $4.45.
Soybeans had a mixed week trading both sides of the 20-day moving average searching for direction. China buying and a U.S. dollar under pressure have helped support the market as has talk of Brazil trucker strikes. New crop November beans closed the week at $11.43, while front month March futures settled at $13.70.
The wheat market continues to follow corn, while hoping for stronger U.S. export demand given Russia’s export tax and talk this week that Argentina may follow suit after imposing previous restrictions on corn. China also is searching for wheat with auctions from state reserves having plenty of interest. July KC new crop futures settled the week at $6.38¾, with essentially no carry in the market out through the December contract. Wheat is one of the most sensitive to increased COVID restrictions given flour-based products for at-home consumption. As the UK variant spreads throughout the world with the first case of the more contagious South African version being detected in the U.S. this week, vaccine progress has been disappointing at best.
The Fed left rates unchanged this week adding concern for slower growth. Former Fed Chair Janet Yellen was confirmed this week as the first woman to become Treasury secretary.
The equity market started the week relatively quiet ahead of Wednesday’s selloff followed by a moderate recovery Thursday and new recent lows to finish the week. Pressure on equities will weigh on the cattle market as a barometer of consumer confidence and spending. January feeder futures and options expired on Thursday and settled at $135.70. Friday saw a very active session in the cattle market. Following Thursday’s inside day on the feeder cattle chart, Friday started out with a break higher followed by a sell off that broke through the 50- and 20-day moving averages down to the 100-day moving average. March feeders made a high at $141.85 and low at $137.40 creating an outside day on the charts. Watch the $137.00 area for support and of course corn’s action on Sunday night into Monday. April live cattle made a new recent high on Friday before selling off for an outside day on the charts as well. Last year, the highs were in mid-January just above the $124 area with current levels near the Feb. 18 highs. This week’s CFTC report indicated that managed funds have increased net long positions in live cattle futures by over 25,000. Watch those highs from last year to be key resistance. I would advise adding protection on rallies at this level. Friday’s USDA bi-annual cattle inventory report, released after the close, revealed all cattle and calf inventory on Jan. 1 were slightly lower than last year, but in line with expectations. Jan. 1 beef cow numbers were higher than expected while the calf crop was lower than expected. We will see how the market reacts to those numbers in Monday’s session.
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 strategies 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. Remember, I am on-site at the Enid Livestock Market on Thursday, sale day. Wishing everyone a successful trading week!
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.
The Link LonkJanuary 31, 2021 at 06:30PM
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GameStop game on; corn breaks out | Ag / Energy | enidnews.com - Enid News & Eagle
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