Howdy market watchers! What a week in the deep freeze it’s been! Midweek, I was thinking that 15 degrees Fahrenheit never felt so good. Finally, the forecasted highs over the coming 10 days are all above freezing. Now, get ready for muddy conditions. In addition to freezing temperatures right at the peak time of spring calving season that resulted in many calves tragically lost, one of the main concerns for the market over the past week has been the potential of winterkill in winter wheat across the northern hemisphere. The situation in Kansas was particularly worrisome with limited snowfall ahead of the freezing temps and previous dryness. Early in the week, it was broadcast that 30 percent of the US winter wheat crop was at threat of winterkill resulting in the market popping only to give it all back in the next session plus some. The wheat market continued to see-saw this week trading in a 50-cent range since mid-January’s highs at $6.61 ½. After gapping higher on Sunday evening, the market filled the gap and closed slightly higher on the week. USDA reports at the end of the week helped to establish direction for the grain and cattle markets with the release of the annual February Outlook Forum forecasts on Thursday and Friday morning and the monthly Cattle-on-Feed report on Friday afternoon after the close. Key numbers early Thursday morning from the first virtual USDA Outlook Forum focused on acreage and average farm gate prices for the year ahead. Corn acreage was pegged at 92.0 million acres versus 90.8 million acres last year, but lower than the 92.9 million acres expected while soybean acres came in at 90.0 million acres versus 83.1 million acres last year and average trade expectations at 89.8 million acres. Wheat acres across all classes were pegged at 45.0 million acres versus 44.3 million acres last year and average expectations of 45.3 million acres. Average farm gate prices were most supportive for wheat at $5.50 for 2021/22, up $0.50 from last year, while corn was seen at $4.20 per bushel, $0.10 below last year and beans at $11.25, up $0.10 per bushel from this past year. With Chinese New Year coming to a close at the end of this past week, we expect to see more buying activity in the week ahead. There was a sale of wheat to China this week further highlighting the unusual tightness of wheat stocks in that country and potential for increased US exports in the year ahead especially if the US dollar remains weak as it continues to be. Friday morning’s USDA releases were fundamentally supportive with carryover stocks remaining tight leaving limited room for Prevent Plant weather issues based on demand levels. Corn exports were increased, but less than our expectations should China continue to increase purchases and should biofuel use pick up. However, it is difficult to apply historical trends to the year ahead with the pandemic continuing to impact economic growth and demand as well as the price of energy, which grain commodities trade in line with given the importance of biofuels in the use mix. Oil and natural gas prices surged this week with increased load on the grid combined with shutdowns at key refineries and distribution points in Texas. WTI reached above $62 briefly late week not seen since late 2018 before finishing the week back below $60 as conditions ease. We have been actively trading the energy complex and expect this to be a volatile market in the year ahead. More farmers are looking at protecting diesel prices through the Heating Oil contract. If you’re interested to get positioned in this market to protect rising diesel prices, give me a call to get protected. Weather patterns in South America continue to add volatility to markets with February being the 3rd driest on record in Argentina with more ahead. Brazil crop progress as of Thursday showed that soybean harvest remains significantly behind last year as well as the average as does 1st crop corn harvest. Second crop corn planting has had a slow start given delayed harvest and remains well behind last year levels and the average. As a result of slow harvest and union strikes in South America, we could see Asian buyers continue to make old crop purchases from the US further tightening carryover stock levels. The weaker US dollar recently that is likely to remain under pressure will also be supportive of the US winning more export business. Russia’s wheat export tax of $25 per ton was implemented this past week on February 15th that will increase on March 1st.It is yet to be seen how this will impact exportable supplies and the extent to which the Black Sea will continue to win tenders especially from the large buyers in north Africa given the transportation advantage. While the wheat market has seen some strength this week, it became even clearer that without a move in corn, wheat futures will find it difficult to sustain any meaningful rally. March grain options expired Friday and so the weakness in corn and beans into the week’s close was not surprising. We will likely see more reaction in this next week’s trade after consideration of the USDA outlook figures and China’s return from holiday. Friday was also the USDA’s monthly Cattle-on-Feed release after the close. February 1st on-feed came in higher than expected at 101.5 percent of last year versus average trade guesses at 100.8 percent. January placements also came in higher than expected at 103.2 percent versus 99.8 percent expected. Marketings in January came in lower than expected at 94.4 percent versus 95.1 percent expected. Bottomline, this report was considered bearish versus expectations. Typically, winter storms are supportive for the cattle market, but with heavy snowfall and gas and electricity being cut to some packing plants down south, there was an unusual situation of reduced buying as shifts were cut. As we quickly approach the time that producers are selling stockers off wheat intended to be harvested, it is important to remember that this is the time of year that markets are often pressured lower. If you’ve held out on protection up to this point, I would advise to consider it now as we could be far from this $140 level by the time you’re selling. Same goes for graze out cattle coming off in May although I expect that market may be firmer by that time given fewer graze out expected given wheat prices and expensive lighter cattle. One final thought for this week. With unprecedented stimulus already pumped into economies around the world with the US contemplating another $1.9 trillion about to be deployed, price inflation and the resulting increase in interest rates out into 2023-2024 is a reality. If you’re farm or business is leveraged, ie, has debt, at these lower interest rates, and you’re interested to hedge or lock in these lower rates, it is time to consider doing so with Eurodollar futures. The margin is $370 for September 2024 futures contract. Give me a call if you would like to implement this risk management opportunity to lock in lower interest rates before a major move. 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!