Ag Market Update - February 3, 2016

 

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     

 

Mar 16 Cotton           .6259              .6177              .6194              - .0036          - .0134

Dec 16 Cotton           .6263             .6205              .6262              + .0021          - .0210

Dec 17 Cotton           .6386             .6284              .6349               - .0085         - .0096

Sep 16 Corn              3.8725          3.8450            3.8550             - .0150          + .1025

Nov 16 Soy               8.9650          8.8650             8.8975             - .0725          - .0725

July 16 Wheat           4.8875          4.8400            4.8775             + .0250          + .0450

 

Cotton LDP Payment - 5.11 cents  (should be fractionally higher next week)

Today's Market Report
Just a short report today.  Cotton prices made a fractional new high on this move before running into heavy resting sell orders and finishing lower on the day by 36 points at .6194 in the March contract. December cotton managed to finish higher today by 21 points at .6262 in another day of heavy spread trading. On the surface, today's action just looks like a normal pullback in a moderately bullish technical picture.  However, it does appear that will be heavy selling as the market approaches .6300 and higher.  We still have a target of .6350 and would still believe that growers should rid themselves of 2015 excess production should we reach that level.  

The main reason for an update today is to let subscribers know, and many of you probably already know, that the Secretary of Agriculture went on record this morning as saying that USDA lawyers have determined that the Department does not have the authority to declare cottonseed an oilseed, as the cotton industry has asked.  The potential declaration would have make cottonseed eligible for farm subsidies, but in an address to the National Association of State Departments of Agriculture this morning, Secretary Vilsack said Congress did not grant the authority in the 2014 Farm Bill and through appropriations has forbidden it to use the Commodity Credit Corporation to provide assistance to farmers or cotton gins. 

It was presumed that Vilsack would be kicking the issue back to Congress to reopen the Farm Bill to create such a program.  This would not be feasible option as all other commodity groups would almost certainly be against re-opening the Farm Bill, and cotton leaders would not press do that anyway. Congressional leaders among the Agriculture committees in both the House and the Senate were informed of the decision and while not in agreement with it, did not offer an alternate or potential plan.  It was noted that the USDA does know that cotton farmers and the industry are in financial stress as the current STAX program is not working while prices are below the cost of production in many places.

I will try to update this situation in this space as the story evolves, but as of today it would appear that our industry has suffered a setback in our efforts to help US cotton growers through a potential government program.   
Inside the Cotton Market
Commentary will return next week.