Sidwell Strategies Week-in-Review: Spring crop prices set for crop insurance

Howdy market watchers! How about some volatility to start the month of March? Well, there was plenty of that to go around this week. Inflation concerns crept higher this week amid comments regarding the patience that the Federal Reserve intends to maintain over its rate policy as unemployment remains elevated. Despite the better than expected private sector job additions of nearly 400,000 in February, Fed officials said that this patience was still appropriate. The equity market reacted negatively to the news only to rebound by Friday’s close with the Dow recovering all the week’s losses although tech stocks remained under pressure with the NASDAQ moving lower. After a week of debate on Capitol Hill, Senate Democrats came to an agreement on Friday evening to reduce the unemployment benefits level contested by a single Democrat that blocked its passage. With an even split of the Senate among Democrats and Republicans, the Dems need every vote in order to move their agenda forward with Vice President Harris casting the winning vote. So there goes budget controls with another $1.9 trillion being released in the coming weeks. That represents nearly 7 percent of our current national debt of $28 trillion and equal to the GDP of Italy. If this doesn’t bridge our economy to post-COVID confidence, I’m not sure what will. The focus will increasingly point towards how this massive stimulus will be unwound and what are the consequences. Meanwhile, more stimulus in the hands of individuals is likely to mean more money coming into the market and further inflating asset values. After OPEC decided to leave production unchanged versus expectations of an increase, crude oil prices surged late week to close above $66 for the first time since April 2019 on a continuation chart. Supply disruptions in the energy markets continues to take it’s toll on downstream industries since the recent winter storms. The largest liquid nitrogen plant in North America is CF Industries’ facility located outside of Tulsa in Verdigris, Oklahoma, has been shut down this week due to gas shortages to fuel the facility. The nitrogen plant in Woodward was also shut down. This comes right at the time when farmers are hurriedly trying to catch up on topdressing after a wet winter with few opportunities to get in the field. Moisture returned to the state on Friday with areas in north central Oklahoma receiving nearly an inch. As a result of the shutdowns, liquid nitrogen prices have surged higher and even those farmers with contracts were unable to get all their loads in some cases. The Mesonet reported the probability of First Hollow Stem for early wheat varieties at 75 percent as far north as Fairview and Blackwell. With many producers holding back cattle for a couple weeks to try and recoup weight losses from the heavy winter storm last month, be checking your fields for First Hollow Stem progress so that you don’t impact wheat yields while attempting to put a few pounds on cattle. In the face of firm grain prices and heavy numbers being sold after recent shutdowns, March feeder futures lost nearly $4 per cwt this week to close at $134.60.Back month contracts from May onwards rebounded Friday from support levels. As I have discussed with several producers this week, you may consider long call options in April or May if you’re selling calves at these levels. With higher wheat prices and higher priced cattle for graze out, I’m expecting a lot fewer cattle in the region on graze out wheat that also means more acres harvested. Wheat prices continued the sideways chop this week holding between the 20- and 50-day moving averages. July new crop KC wheat settled the week just below $6.32. The $6.60 level looks to be the highs for the time being. The FAO this week forecast record wheat production in 2021. Major exporter France’s wheat crop conditions improved again this week at 88 percent good to excellent. While the outlook for wheat depends much on the direction of corn, be mindful of protection up here. March 1st marked the end to the spring crop price tracking for crop insurance. All prices levels are listed on our Facebook page shared from Sidwell Insurance. A few of interest include Oklahoma, Texas and Kansas corn at $4.58, cotton at $0.83, milo at $4.40, Oklahoma soybeans at $11.81 and Texas and Kansas soybeans at $11.87. Much improved levels not seen in a while. Enterprise Grain recently announced the primary crop sesame contract price at the annual sesame meeting last month. Delivery points are in Goltry and Kremlin, Oklahoma, as well as CHS in either Kingfisher or Omega under a new partnership between Enterprise Grain and CHS. Our seed genetics through seed partner Equinom lead the sesame industry in germination and yield potential. All of our seed comes treated with fungicide and insecticide to aid in getting a stand. For more information, call Enterprise Grain at (580) 874-2286 or CHS if you’re closer to those delivery points. We will continue to expand regional delivery points in the coming seasons. Tuesday marks the release of the next monthly USDA WASDE and Crop Production reports. Stock and export numbers will be watched as will any adjustments to winter wheat from recent deep freeze although it is likely still too early to tell. The market is in need of fresh news to provide some direction as there has been a wait-and-see range bound trade until the end of March Prospective Plantings and Grain Stocks reports. The firmer US dollar this week didn’t seem to phase the grain markets that much even though exports were unimpressive. New crop contracts for corn and beans are finally picking up pace. December corn finished the week at $4.81 ½ while September remains higher at $4.99. November beans settled the week at $12.47 ¼. If you would like to lock in these futures levels through a Hedge-to-Arrive contract, while leaving the basis open and most importantly, not having to decide the delivery point and therefore, you have the ability to fully negotiate the basis with whatever delivery point you choose when you’re ready, give me a call as I have a new solution for producers to do exactly that. This is a very creative solution to lock in futures without having to pay margin calls, but also have the freedom to negotiate the basis with delivery points once you are ready. This is product is nationwide and not limited to our immediate area. 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!

 

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.