Howdy market watchers! 

The clocks have been rolled forward with 5 days until Spring’s start, but the weather is already beginning to act up. Across the US southern plains on Friday, high winds and extreme fire risk covered 6-7 states with Oklahoma and Texas experiencing the worst of the severity and without any precipitation.  With drought conditions already present and spreading, such gale force winds are not what the doctor ordered.  Praying for those impacted by these harsh conditions and the firefighters and first responders who are aiding in the hurt.  

Nearly 30 percent of the US winter wheat crop area is experiencing drought conditions as is 55 percent of the corn area ahead of upcoming planting season.  

We are just two weeks away from USDA’s Planting Intentions report, which will provide a new wave of market volatility.  The last trade date of March futures contracts was on Friday and so May is now the front month on all accounts.  

Tariff rhetoric continues to dominate headlines with more countries retaliating to President Trump’s offensive.  China, Canada and Europe have all announced increased tariffs on various US goods in response to escalating tariff tensions.  However, there is still time for calmer heads to prevail with a number of these defensive actions not taking effect until early-to-mid-April.  Of course, April 2^nd is also the start of reciprocal US tariffs equal to the tariffs of said goods placed on US origin.  

Suffice it to say that early April has the potential to be an extra volatile time for commodities with the USDA reports followed by tariff implementation.  We saw several buyers active for US corn and soybeans this week with last week also strong. Forthcoming tariffs as well as the dramatic selloff in the US dollar make now an attractive time to get more orders on the books for our foreign customers.  

Despite more stability in the US dollar index this week, we did make another new low for the recent move.  This should continue to provide underlying support to commodity markets.  

Meanwhile, the equity markets have been hard pressed to find support after a 10 percent correction in just as many days.  With February inflation, reported this week at 2.8 percent, coming in lower than expected, equity markets caught a bid Friday posting a strong and much needed relief rally.  Still, it was the worst week since 2023.  

Amid the nervousness this week, investors are becoming increasingly concerned of a more extended correction as international conflicts mount amid tariffs and fear of a recession.  The confidence of the US consumer, which has been the overwhelming strength of our economy, is waning with this week’s update from the University of Michigan showing the lowest level since November 2022.  The real question is whether these tit for tat tariffs will last or negotiations will be reached in the coming months to take this outsized risk off the table.  Should that happen, it seems highly likely that everything could bounce back strongly, but the timing is of course unknown.  

As I have been observing President Trump’s chess moves, I am beginning to think that some chaos and correction of market exuberance may be the Administration’s strategy to help bring down inflation and subsequently, interest rates. Tariffs, by nature, are inflationary and so lower interest rates cannot live simultaneously among a healthy, growing economy with disrupted supply chains that lead to higher cost.  With that in mind, we should begin to embrace an approach that this chaotic environment could last longer than many currently expect in order to materially bring down inflation as well as interest rates.  Said plainly, the economy must slow for interest rates to ease even without tariffs.

The Federal Reserve's FOMC meeting gathers next Tuesday and Wednesday with the interest rate decision announced at the end of the meeting followed by Chair Powell's press conference.

From a crop and livestock marketing perspective, it is as important as ever to know your break-even and profit margin target and get an actionable strategy in place through futures, options and forward contracts to capture those needed price levels if and when they return.  With an emerging concern of lower than comfortable corn stocks in Brazil, there are fundamental factors that could rally back the market, but know the price you need for your profit margin goal and take action.  

If the world economies do in fact slow in order to lower overall interest rates, these markets could also move a lot lower especially if new crop conditions in the US start strong.  

This week’s USDA WASDE and Crop Production reports didn’t reveal much with many figures unchanged despite higher US and world ending stocks for wheat. December new crop corn futures are consolidating around the $4.50 level with inside chart days on Thursday as well as Friday.  I could see us trading in a 10-cent range up to $4.60 until the Planting Intensions Report. 
 

New crop November soybean futures closed Friday at the day’s high at $10.20 and just above Thursday’s high.  I believe we have a rebound coming in the soybean market despite China tariff announcements.  I could see the mid-$10.30’s in the cards soon and perhaps higher into the end of month reports.  Brazil harvest and planting remains ahead of the averages and so no surprises there at the moment unless it is from weather conditions.  

The wheat market continues to be choppy, but had a relatively strong week. I was hoping for a stronger close on Friday although we did make a new daily high, which was encouraging.  With winter wheat in the northern hemisphere coming out of dormancy with hot, dry conditions, I think these concerns could excite buyers again.  India will be in key focus as well with hot temperatures potentially threatening the wheat crop, but it is still projected locally as a record.  The Russia-Ukraine ceasefire seemed to get some legs this week until Putin vaguely made more demands from what he sees as a position of strength. While one could argue a “deal” there could take risk premium out of the markets, I’m not sure there is much of a risk premium remaining at these levels and really only for the wheat complex at that. 

In addition to the 15 percent tariff from China on US corn, wheat and cotton, they also announced a 10 percent tariff on US soybeans, sorghum and meat.  The news on sorghum has some growers switching planting intentions to corn given China is such a market maker or breaker for sorghum basis for US farmers.  

Also, one would have thought that this news would have brought about more pressure on the cattle complex, but again, it couldn’t be held down.  As we saw last week, cash fed cattle trades on Friday surged to a high of $206 in Western Nebraska and Colorado and $203 in Texas and Kansas.  After some early session weakness, feeder and live cattle futures reversed higher. Feeder futures however did not make a new high above Thursday’s high on Friday.  April live cattle had an inside chart day and closed just slightly off the session highs.  

There is talk of cash fed cattle trade reaching $215 at some point, but we will have to see if that is soon or later this fall.  Bullish market environments are the hardest time to discuss downside risk management, but it really is the best time to be taking action.  There are several options to be able to step into protection without leaving all the upside on the table.  With the broader uncertainty, I still think these are great areas to protect the downside. 

Give me a call and let’s discuss the strategies that allow you to protect these profits, but keep some upside open should we make another leg higher.  

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.