Ag Market Update - April 9, 2015

 

by Ron Lee

 

Highway 118 West, PO Box 171

Bronwood, GA 39826

Work:229.995.2616

Mobile:229.881.3903

ronlee@mccleskeycotton.com

 

Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     

 

 May 15 Cotton         .6713              .6611               .6622             - .0051          + .0505

Dec 15 Cotton          .6598              .6511               .6596             - .0001          + .0154

Dec 16 Cotton                                                         .6450             + .0001         - .0128

Dec 17 Cotton                                                         .6613             + .0001      

Sep 15 Corn             3.9575            3.9075             3.9350           - .0150          - .2925

Nov 15 Soy              9.6100            9.4175             9.4525           - .1525          - .6025

July 15 Wheat          5.2400            5.1100             5.1750           - .0625          - .8000

Today's Market Report
Just a short quick update because the Masters golf coverage starts here in about 45 minutes and that is much-watch television, even the 1st round on Thursday.  The agricultural markets were all in anticipation of the monthly Supply/Demand numbers today, even as the April report is often a yawner as we are wrapping up the previous crop as we prepare for the next one.  The report was largely just that, a yawner, as basically all key numbers came in within the range of expert opinions.  The speculators continue to be enamored with the long side of cotton, but some late day selling caused May cotton to finish in negative territory for the first time in five sessions.  May finished the day at .6622, down 51 points.  The new crop December settled lower as well, but only one teeny tiny tick.  The grain board finished the day in negative territory across the board, with soybeans leading the way lower.  The USDA numbers for corn, soybeans, and wheat had little effect on the market as those markets were lower before the report and lower after the news came in.  November soybeans fell by 15-18 cents per bushel, and while volatile in nature, I still believe these prices will continue to trend lower.  Corn only settled fractionally lower by 1-2 cents, while wheat did recover some late in the session, but did lose roughly a nickel in value.  We are seeing another huge gain in the dollar index today, which could be leaning on commodities as well as most are lower across the spectrum today.
Inside the Cotton Market
 While the market did finish lower today, it has been quite the impressive run for cotton futures over the last few days.  May has traded above .6700 several times, while December continues to knock on the door of .6600.  The report today was much to do about nothing, with the only real change coming in the form of increased US production last season by 300,000 bales which we knew about two weeks ago.  The bulls were probably disappointed that the subsequent increase in production didn't lead to an increase in exports, but I would guess that the USDA also guessed right in this case.  World ending stocks of 110 million bales still looks like a science fiction number, even though the cotton world seems numb to the fact. Regardless, I still believe that the upside in the market will continue to be contained by that number.  As mentioned earlier, the speculator has fallen in love once again with cotton, buying thousands of contracts in the last several days, with actually very little to show for it.  Between the funny action of the May/July spread and the daily appearance of more and more certificated stock, I believe this bullish run in old crop prices is in the twilight of its glory.  We could see May try to run up toward the old high of .6795, but I think those that are actually in the cotton business as opposed to those that just trade cotton will be selling very aggressively up there.  As for new crop, the story remains the same in that I just don't think the December is going to do very much one way or the other for the foreseeable future.  We attempted unsuccessfully to sell some options today in December to take advantage of time value as I think that is the only real way to trade new crop at the moment.  I certainly will not talk anyone out of selling some physical cotton here at .6600 because I do think old crop prices are artificially inflated.  At the same time, I can understand a grower not wanting to sell any with all of the unknowns out there between now and harvest.  I will be watching the market again tomorrow, albeit on split screen with Masters coverage, to make sure we don't miss any opportunities.