Ag Market Update - August 11, 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     

 

Dec 15 Cotton                  .6230                     .6157                     .6182                    - .0014                - .0260

Dec 16 Cotton                  .6260                     .6248                     .6266                    -. 0017                - .0312

Dec 17 Cotton                                                                                 .6359                    - .0023

Sep 15 Corn                     3.8850                   3.7600                  3.7650                  - .1375                - .4625

Sep 16 Corn                     4.0375                   3.9500                  3.9500                  - .1175                - .3300

Nov 15 Soy                       9.9200                  9.6750                  9.7150                  - .2300                 - .3400 

Nov 16 Soy                       9.3625                  9.2150                  9.2450                  - .1675                 - .6750

July 16 Wheat                  5.4150                  5.2600                  5.2800                  - .1750                 - .6900

Today's Market Report
In hindsight, I certainly should have written a market update yesterday as opposed to today.  Yesterday, we could have been giddy about the outstanding performance in the Chicago grain markets instead of talking about why we basically returned all of yesterday's gains during today's trading session.  I guess one bright spot today to mention is the performance of cotton, which has been beaten and bruised over the last 2-3 weeks.  When you look at the above quotes and see cotton traded lower again today, you might be asking "What in the World are you talking about, a good performer?"  Well cotton prices were down 14 points, while corn dropped 11-14 cents, soybeans lost 23-30 cents, and wheat prices were off by 16-18 cents, not to mention crude oil down $2.00, the Dow Jones off 220 points, and the S&P down 22.  So if you look at it in those terms, cotton did hang in pretty good today.  Looking at the grains, we saw huge gains on Friday and then again, big time, yesterday as traders were expecting a marginal drop in crop ratings yesterday afternoon.  When the ratings came in all but unchanged, we saw a soft opening last night.  Then the other shoe dropped in the middle of the night when the Chinese government decided to devalue the Yuan by almost 2% in relation to the dollar as their economy continues to sputter and exports shrink nearly every quarter.  Many are expecting other countries to follow suit, which would be most probable track toward global deflation.  At the very least, it makes US agricultural exports into China less favorable by the flip of a switch.  Seeing as how we aren't exporting any cotton into China as it was, it will be even harder to do so now and the grains will likely feel the pinch as well, particularly if our dollar continues to strengthen.  On the flip side, this could very well lead to a delay in the interest rate hike we have been expecting so how it all plays out remains to be seen.  Tomorrow we take on a whole new dynamic as the ag markets will focus on the August Supply/Demand numbers due out at 12 noon eastern. It seems that most all analytical firms are in near agreement on both corn and soybean yield at the moment, so we will have to examine the USDA's numbers versus the consensus of 165ish corn yield and 44ish soybean yield.  One would assume that if the USDA numbers are similar, we will simply go right back to trading a weather market for the next several weeks until harvest begins in earnest.  It would appear that after receiving too much rain in areas of the corn belt during the early summer, most all growing areas of the United States are in need of a good, general rain going forward and that rings true here in South Georgia as well.
Inside the Cotton Market
Our cotton market continues to drift moderately lower, but as we mentioned earlier, it really outperformed today when you look across the board at all markets.  Volume was on the lighter side today at just under 17,000 contracts as the grains certainly stole the show.  Just as we talked about in our last update, the December market seems to be trying to find a bottom and thus far the .6128 low of January 23rd seems to be holding.  For those looking for bullish bullet points, we are seeing the number of bales in certificated warehouses starting to dwindle as prices move lower and for the first time in weeks, the US crop could use a good, general soaking rain event.  While I do believe we stand the chance of seeing prices lower during the heat of harvest, we have probably moved low enough in the short term, especially with the crop report due out tomorrow.  Most are expecting lower acreage, higher yields, and increased old-crop exports in tomorrow's numbers and an overall neutral report.  I maintain that we could see a report that keeps acreage relatively flat, increases yield, and reduced Chinese consumption (meaning reduced new crop US exports).  If this comes to pass we may see even further pressure on prices, although I'm convinced the trade is usually months ahead of the USDA on these types of things.  All in all, not a lot to say on the cotton market today.  If we didn't have the report tomorrow, I would feel pretty good about the prospects of more sideways trade until we can start to get into the crux of harvest.  However, the August report has been known to throw the market a curve ball from time to time so we will have to see what tomorrow brings before making our next recommendation regarding the marketing of the 2015 cotton crop.