Ag Market Update - April 27, 2015


by Ron Lee


Highway 118 West, PO Box 171

Bronwood, GA 39826




Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     


July 15 Cotton          .6750              .6588               .6623             - .0011           + .0423

Dec 15 Cotton          .6635             .6536               .6563              + .0001         + .0121

Dec 16 Cotton                                                        .6563              - .0061          - .0015

Dec 17 Cotton                                                        .6722              - .0061

Sep 15 Corn             3.7750           3.7200            3.7250            - .0500           - .5025

Nov 15 Soy              9.5975           9.4700            9.5200             - .0050          - .5350

July 15 Wheat          4.9050           4.7225            4.7325             - .1525          - 1.2425

Today's Market Report
After the biggest one-day gainer for cotton in nearly 20 months, cotton futures extended that rally on Friday, and today posted the highest level for cotton since last September, only for the bulls to be disappointed by the close of the market.  Despite being higher 115 points at one time, the July cotton contract closed at .6623, down 11 points.  While the December contract did finish higher by one tick at .6563, it was off the high by some 70 points by the time the final bell rang.  Grains were lower on the day as well, led south by wheat which dropped another 13-15 cents.  Corn prices slumped again as well, down a nickel across the board.  Good planting weather for much of the Corn Belt, along with technical considerations continue to lead these markets lower.  Our idea that wheat prices should be supported below $5.00 certainly went out the window today as prices established fresh new lows.  Soybeans were higher most of the day, but fell victim to the negativeness surrounding their grain pit counterparts.  November soybeans finished the day at 9.52, down 1/2 of a penny.   Most markets have started the week in negative territory, but it was largely a non-eventful day across the commodity and equity markets today.  A slightly lower dollar index couldn't spur gains out of most any of the sectors today.
Inside the Cotton Market
 I've said in this space more times than I can count that I know just enough about technical analysis to be dangerous.  I don't think it takes a genius to know that today's close was a terrible one technically for our cotton market.  At noon, we were trading some 115 points higher, on fresh new 8 month highs, with the charts clearing giving speculative interest a buy signal.  Some two hours later, the market was in negative territory with those same people that were happy to buy the market earlier beating a hasty retreat toward the door.  By the end of the session, volume was healthy, nearing 30,000 contracts on the day.  The further reaches of our 6100 to 6750 range in July was touched before the market pulled back some 125 points.  The other times the market made new highs on speculative buying in the last several months, we saw a lower close by day end, just like today, followed by a return to the bottom of the range.  I don't want to say I guarantee that will happen again because I obviously don't know, but I can't make a good argument for being long above 6700.  People will say that the market should run to 7000 or so because of the lack of quality cotton available, but until I see strong sales when the market is at this level, I'm sticking to my guns of Selling the market above 6600 and Buying it below 6300.  I really can't imagine why July wouldn't expire around the 6500 handle just like March and May did before it.  As for new crop December, it still isn't traded very much in outright terms.  We had orders in just below 6700 and thought we might have a chance to sell some, had the market kept advancing.  The crop progress numbers just came out and while we are still behind the 5 year average for planting in almost every state, I would argue that with the exception of South Texas, it is far too early for those concerns to have an effect on the market.  It could be argued that the acres lost in South Texas will be replaced by additional Delta cotton acreage where corn couldn't get planted.  Again, it's still too early to tell.  Good rains in the Upper Panhandle of West Texas yesterday and today add to an already much improved ground moisture situation out there.  To repeat a broken record, I think it would be prudent for growers to price a portion of their cotton production in the 6600 to 6700 range as advances past this level will be hard to come by, knowing everything we know today.