Ag Market Update - August 27, 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          .6342              .6240              .6335              + .0084          - .0087

Dec 16 Cotton          .6293              .6279              .6354              + .0089          - .0224

Dec 17 Cotton                                                        .6461              + .0079

Sep 15 Corn             3.6725           3.6025            3.6300             + .0125         - .5975

Sep 16 Corn            3.9450            3.9000            3.9325             + .0375         - .3475

Nov 15 Soy              8.8400            8.6600            8.7775             + .1275         - 1.2775

Nov 16 Soy              8.7625            8.6200            8.7200             + .1125         - .1.200

July 16 Wheat          5.1475            5.0225            5.0675             - .0125          - .9025

Today's Market Report
Between yesterday and today, it seems that at least for now, the world might not be coming to an end.  Stocks have regained all of the week's losses and more than half of the entire recent plunge as the Chinese central bank has taken measures and as US GDP growth in the 2nd quarter was on the impressive side.  As you might imagine, as the broader markets go, cotton prices (today finally) are firming as well.  December cotton, on moderate volume, gained 84 points and closed at .6335 today, trading at its strongest at the close of the session which always leaves the bull with a pretty good feeling.  Distant year contracts were up by like amounts.  Grain markets were rather quiet and mixed, with the exception of soybeans which posted double-digit gains as bottom pickers and scant demand helped to put a band-aid on that struggling market.  Corn prices were up by roughly a penny in the 2015 crop contracts and 3-4 cents in the 2016 contracts.  Wheat prices finished the session down 1-5 cents.  Export demand for both corn and soybeans was better than expected today.  Weather forecasts for the primary grain growing areas remains favorable for the most part as we head toward the weekend, although some areas like Iowa are expected to see heavier than wanted rainfall over the next 7 days.  The biggest gainer today is in the energy market where crude oil is up over $3.00/barrel and back above $40.00 on the GDP news and improved Chinese pulse. Gasoline futures are up by 7-8 cents while heating oil (diesel) is up more than a dime.  We will watch it closely over the next few sessions but hedging diesel fuel at $1.50 on the board seems pretty tempting on the surface. Stocks had a big day yesterday with the Dow up more than 600 points and are seeing follow through on this Thursday.  With less than an hour to go, the Dow is up more than 200 and the predicted mood at the bar on Friday afternoon for stock brokers is improving by the minute. 
Inside the Cotton Market
The cotton market had its best performance since the proverbial stuff hit the fan late last week and while many will call this a dead cat bounce, I believe we are headed right back to the heart of the old, boring range for the next couple of weeks in all likelihood. The export report this morning was pretty pedestrian and China was once again absent from the buyers list, but nobody has really paid much attention to the export report lately anyhow.  One of these days, we are going to escape the range that we have talked about for 8-9 months now but I don't see how we will do that before the September 12th crop report.  Again, there is just too much uncertainty out there at the moment.  Are the Chinese stock numbers right? Is there any way the USDA can be right with their 13.1 US crop size? How bad will demand suffer if we move toward global recession? How cheap can they sell polyester with crude oil at 6-yr lows? I could name you a dozen more but long story short, I believe we are about to head right back to the sweet spot of this market which lies somewhere between 64 and 66 cents.  It should be noted that four different people that I have spoken with that attended the National Cotton Council's recent board meeting were all in unison as far talking to West Texas cotton interests.  All reports were that people from that neck of the woods all thought their crop was in good to very good shape and with a good September, a crop far superior to the USDAs estimate would be harvested.  Why do I feel like I am typing the same things that I have been typing for the last two months....probably because I am !!  The latest on Tropical Storm Erika still has her moving up the eastern coast beginning on Monday bringing rain and high surf to the eastern Florida, Georgia, and Carolina coasts.  However, it does bear mentioning that the latest update takes the storm on a more southward path that leaves an outside chance of it moving into the eastern Gulf of Mexico.  While we wouldn't mind a couple more showers to finish out what I believe is a very good crop in Georgia, we would prefer that they not come via named storms.  So to leave you this week, cotton should continue to do a whole lot of nothing.  We have pretty much got a portion of hedges on in the 6650 - 6800 area for most all customers that are not marketing their cotton with the cooperatives and have added a little bit to those prices via option strategies.  Being this close to harvest, I probably would not price any more cotton unless we take out the .6811 high which I feel is pretty improbable.  Use the balance of your crop to fetch potentially high premium offers or work the price/LDP game on the weeks that allow that opportunity.

We will be having our annual pre-harvest cotton meeting on Thursday, September 10th at the Dawson Country Club beginning at 6:30 pm.  A letter along with phone correspondence will go out to our customer base next week. This will also be a special meeting in that we will be recognizing Mrs. Belinda Webb, our office manager, who is retiring from McCleskey Cotton Company at the end of this month.  Belinda has been with us since we ginned our first bale in 1995 and has done a tremendous job on behalf of our cotton customers for the last twenty years.  We would invite merchants, bankers, and any one else that has had the pleasure of working with her during this time to join us on this special occasion.  The meeting will also serve as a chance for growers and vendors to put a face with a name on our current office staff who will be at the meeting as well.  If you plan to attend our meeting, please call the office at 229.995.2616 next week so that we might prepare dinner for the correct number of people.