Howdy market watchers! And just like that, July has come to an end.  

Unlike other years, it has been an eventful conclusion to an otherwise uneventful time of year. The US Presidential election that is still 4 months away has dominated headlines with the unexpected happening. After an attempted assassination of the former President, Trump secured the Republican nomination at the RNC that followed and named his VP candidate.  President Biden then bowed out of the race putting full support behind VP Harris. The Obama’s have now endorsed Harris as well that should essentially end the speculation of who the Democratic presidential contender will be on that side of the ticket.  The VP pick will however be critically important in determining how much competition this fast-emerging ticket will be for the GOP.  

One thing for sure is that we’re likely to see a lot less of Biden and a lot more of Harris in the remaining lame duck term of the former.  

Thank you to all those that attended our LRP and Futures/Options training classes on Friday. We are going to be scheduling more of these in the near future and please let us know if you’d like to attend. It is a great way to freshen up on terminology and demystify the workings of these risk management tools that can make them seem impractical to use.  Bottomline, there are not many tools available for producers to protect price risk at their command other than futures, options and Livestock Risk Protection (LRP). 

Market uncertainty creates volatility. We have seen plenty of volatility across markets in recent weeks with equity markets whipsawing dramatically this week with 600+ point daily swings on the Dow Jones.  Just when we think this mega rally is over, buying returns and impresses to the upside.  

The cattle market has benefited from this optimism and significant strength in the fed cattle cash markets this week that pushed August Live cattle futures to highs not seen since last October.  As of late Friday, the weekly fed cattle cash high trades were $190 per cwt in Texas and $198 per cwt in Nebraska.  Could we see a $200 handle next week?  It is possible, but this is a tricky time of year in the cattle markets with summer demand winding down.  

However, I think it is also the case that packers have been holding off of purchases as long as they can and have had to jump back in regardless of the price due to demand strength.  

Last week, I attended the annual RJ O’Brien brokers conference that was held in Kansas City this time.  The comment was made that the current strength in beef prices is all demand driven versus supply shortages.  While supply is tightening, we are not in the thick of supply shortages at this time and consumers continue to buy beef even at these higher prices.  

Last week’s USDA Cattle-on-Feed report showed tighter than expected placements that were the lowest in 8 years while on-feed numbers were also lower than expected though modestly.  Marketings in June were however lower than expected and the lowest in 9 years shedding light on the fact that packers have been holding out buying at these price levels.  

This weeks explosive cash trades indicate that the market wants the beef and the packers are going to have to buy the cattle despite heavier weights and higher prices.  Let’s hope that trend keeps trending.  The strength remains in the front months of Live and Feeder cattle futures with deferred months slow to catch a bid.  

Dry, hot weather forecasts for the corn and bean belt along with US export purchases announced this week led to short covering in both row crop contracts despite the profit taking plunge on Friday.  US weather is a sensitive trigger in the coming weeks for row crops although the corn is getting closer to being made with decently favorable conditions.  
 

This week’s corn ratings came in one percentage point below last week and trade expectations, but still 10 percentage points ahead of last year’s Good-to-Excellent ratings this time of year of 57 percent.  US soybean conditions also remain ahead of last year and basically in line with corn ratings at 68 percent G/E.  If US export demand begins picking up in earnest along with extended calls for hot and dry conditions in the Midwest, short covering could result in some exciting market movements.  

Having said that, late week forecast started shifting to a lower concern of such conditions. August is most important for beans versus corn and so export demand is a must.  

However, common customers for US purchases are well behind needed levels to reach annual USDA targets.  Therefore, more export announcements are not necessarily business and there is catch-up business to be done just to be on track for standard levels to be achieved.  

And then there’s the wheat market.  Just when we think we’re about to bottom, we make another low. The US spring wheat tour conducted this week pegged this year’s spring wheat yield at a record 54.5 bushels per acre (bpa) versus last year’s 47.4 bpa yield.  Durum wheat yields were also seen above last year at 45.3 bpa versus last year’s 43.9 bpa.  Spring wheat conditions were also bumped up one percentage point versus expectations to 77 percent G/E, but unchanged from the week before and well ahead of last year’s 49 percent G/E.  

Despite this, I was somewhat surprised that wheat futures didn’t plummet on Thursday when the 3-day tour concluded barring Friday’s selloff of course.  However, I attribute Friday’s plunge as more profit taking in row crops after impressive moves higher that pulled the wheat market down.  

Next Wednesday marks the end of the month, coinciding with the Fed’s FOMC interest rate decision and I wouldn’t be surprised if we find renewed buying in grains at some point next week.  The Fed is widely expected to leave rates unchanged for one more meeting before a potential cut in September.  There is plenty of economic data between now and then and there are beginning to be signs of more stress among consumers that has been observed on the ground for quite a few months.  It may be coming time soon that these anecdotes begin translating into the data, which is the trigger for action to be taken.  

If you are well above your breakeven in the cattle market, protect these prices.  If you are well below in the grains, but need to sell, utilize futures and options to remain in the market as we could be very near support with a weakening US dollar stimulating demand that will only begin to firm if interest rates are cut. 

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 http://www.sidwellstrategies.com/disclaimer.