Grains on the cusp of a potential break higher

Wheat - Field of wheat at golden hour

Howdy market watchers! 

I think the best way to start this week is to say that a potentially significant crisis has been averted, at least for now.  Iran’s attacks last weekend on Israel, which was the first direct confrontation of its kind in history, followed by Israel’s response in the early morning hours of Friday their time, had and still has the potential to change the narrative of geopolitics worldwide.  

However, it seems for now that both sides are appeased with the tit for tat.  Having said that, tensions remain high, and anything could happen at any time to spark elevated risk.  

Despite these historic events, it is interesting that markets seem to be getting somewhat desensitized to such headlines.  It’s true that crude surged $3+ and the Dow Jones plummeted nearly 500 points in the overnight trade this week, but both leveled out before the day session.  In fact, crude just barely closed positive while the Dow Jones closed 240+ points higher, far off of the risk-off levels when the missiles were flying.  

Grains saw similar moves with wheat popping, but fading in the early morning hours.  Overnight, I was very concerned about Friday morning’s cattle market open.  The calming of outside markets before the day session however lessened concerns and after some selling pressure, feeder cattle markets largely closed even-to-positive while fed cattle contracts closed 20-45 cents higher.  

The USDA’s monthly Cattle-on-Feed report for April was released at 2 PM CDT on Friday, which was after the market close as always.  Both on-feed and placement numbers had a bullish bias while marketings leveled things out with a bearish tilt.  

April 1st on-feed figures were lower than expected at 101.5 percent of last year versus 102.1 percent expected.  March placements were sharply lower than expected at 87.7 percent versus 93.0 percent expected and were the lowest for last month in 4 years. March marketings were lower than expected at 86.3 percent versus 88.1 percent expected and were the lowest for the month in 9 years.  

As was the case last weekend, barring any type of major event over the weekend, I believe this feeder market has another $2.50-3.00 per pound higher and fed cattle contracts have another $1.00 in June and perhaps $2.00-2.50 in August.  Watch this equity market for cattle ques.  

The Fed’s FOMC doesn’t meet until April 30th with results announced on May 1st.  As we’ve seen in recent data, it is unlikely the Fed will make any move in this meeting.  In fact, it may not be until the fall that the Fed makes a cut, but that is all data dependent.  Middle East tensions will only increase fuel inflation.  

On Friday, the EPA also announced an emergency fuel waiver to permit E15 gasoline blends throughout the summer driving season, increasing the demand for bioethanol.  This could offset some of the peak demand for petroleum based fuels while adding demand for corn for ethanol.  

With USDA’s lower US corn acre number and this added demand before much of the crop has been planted, it could make the spring weather market particularly volatile for the corn futures.  The USDA said this week that the US crop is 6 percent planted versus 7 percent expected, but still ahead of the 5 percent average.  Soybean plantings were ahead of expectations at 3 percent complete versus 2 percent expected as was cotton at 8 percent complete although in line with the average.  

With cotton plantings ahead of schedule, cotton futures have undergone a brutal technical selloff in the past two weeks with December new crop contracts plummeting from 84.50 cents to below 77.50 cents per pound.  In fact, many of these spring planted commodity markets have been under immense pressure which makes upcoming weather conditions even more of a trigger for short covering.  

March NOPA crush, released on Monday, came in slightly lower than expectations, but still an all-time record high.  US export sales this week came in as expected for corn and soybeans while net cancellations were seen in old crop wheat again by China.  News this week that China’s economy reportedly grew at a higher-than-expected 5.4 percent could be supportive of grain markets if buying re-emerges despite all the window dressing they are doing on planting more acres. 

Winter wheat conditions in the southern plains continue to add a bullish undertone in the wheat markets.  This week’s wheat conditions were one percent below last week, but as expected at 55 percent Good-to-Excellent.  Overall, current conditions are the best in four years with soft red wheat the best in 24 years for mid-April, but key hard red winter wheat states are deteriorating.  Oklahoma was down another 8 percent G/E while Kansas was down 6 percent.  

Key rains were missed this week in most areas. There are chances this weekend, but they are unlikely to be very promising with scattered coverage.  Also, the wheat is at least two weeks ahead of schedule with much of Oklahoma and parts of Kansas already headed out.  This week’s cooler weather and overcast conditions will help fill berries, but lack of rain in the coming weeks and a return to warmer, dryer conditions will continue to reduce yields in a material way. 

There are already fields in Oklahoma and Kansas being released through crop insurance for 5-bushel yields and under. Rust has quickly spread throughout winter wheat areas as well from high winds spreading spores over a wide region. This has made the cost of fungicide a hard decision for many producers unsure of the coming weeks of weather, but what’s new.  It is a tough decision in most years.  Spring wheat planting came in this week at 7 percent planted in line with expectations and ahead of average.  

The US dollar has remained stubbornly strong, but I believe this wheat market has upside potential in the coming weeks.  India’s wheat reserves are now at a 16-year low ahead of harvest while Russian shipments have slowed with complications with one of the exporters.  I believe the opportunity is more so in the Kansas City wheat contracts than Chicago wheat, but both are likely to see moves.  Corn could be right behind.  It’s been a slow grind, but it’s time to be vigilant.  

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 [email protected].  Futures and Options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at

On the date of publication, Brady Sidwell did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.