Ag Market Update - June 16, 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          .6516              .6316               .6497             + .0134          + .0055

Dec 16 Cotton          .6483              .6400               .6512             + .0108          - .0066

Dec 17 Cotton                                                         .6577             + .0108

Sep 15 Corn             3.6000           3.5200             3.5975           + .0700          - .6300

Nov 15 Soy               9.2900           9.0500            9.2750            + .2325         - .7800

July 15 Wheat           4.9500           4.8700            4.8875            - .0075          - 1.0875

Today's Market Report
Buy something when you think it is done going down, not because you think it is going up: that and you can ball up yesterday's report and throw it in the trash can are the best two explanations I can give for today's market action.  Despite a fractionally higher dollar index today, row crop commodities with the exception of wheat futures roared back higher today after yesterday when significant lows were made in these various markets.  Cotton prices, after making a multi-month low yesterday and following through marginally this morning, roared back just before lunch today and finished with gains of 134 points, wiping out yesterday's entire loss with a little bit left over.  December closed at .6497, right back in the heart of our tried and tested range.  Soybeans traded much like cotton, in that it seemed market participants thought prices had simply gotten too low for the time being, and saw sizable closing gains of 20-23 cents.  Corn prices tagged along with the bean complex, gaining 5-7 cents on the day after making contract lows in December yesterday.  As I mentioned earlier, the only holdout was the wheat market which settled fractionally lower on the day.  The gains originated in the soybean pit after yesterday's crop condition report which showed that a substantial number of soybean acres have yet to be planted and a crop condition less stellar than experts were predicting.  With widespread rains from Tropical Storm Bill expected to cover much of this area over the next 3-4 days, the thought now becomes "How many intended soybean acres will go unplanted?"  In the short term, this certainly gives grain bulls some ammunition and as I've said before, with the speculative community so short, any short-covering rally could extend prices further than one would think.  You will also start to hear want-to-be bulls start to talk of a weekly reversal  after today's gain and while that is certainly a valid theory, I still believe it will turn out to be a selling opportunity for those that have very little grain sold as of now, and the same may go for cotton.  Much the same is happening in the stock markets today, where gains are erasing yesterday's losses as the Fed starts their meeting and ideas that Greece and its creditors may be able to reach some compromise are floated.  You don't have to ball up that part of yesterday's report by the way.  All of this certainly may grow legs to become more than this but right now, I'd call this nothing more than a Textbook Turnaround Tuesday. 
Inside the Cotton Market
Yesterday, for the 157th time in the last two years, I mentioned the phrase "Sell Rallies" certainly not thinking we would get an opportunity this quickly.  The December market rallied some 200 points in less than an hour this morning after making a new low for the move at .6316.  What caused this spike, you might ask?  Well, I really don't have a clue other than like I said earlier, Somebody felt this market had gone low enough to buy it.  My gut guess is that the buying likely was initiated in the July contract, where somebody is likely willing to take however much of the certificated stock is offered on the premise of it being worth more than one would presume because of the prospects of a very late US crop.  Again, that is just my guess.  The buying certainly didn't stem from yesterday's crop condition report which showed that US farmers made a lot of headway last week toward finishing the planting of the cotton crop.  At 91%, the crop is for all intents and purposes, in the ground.  The condition report also showed a crop that is faring very well and with a lot of promise.  The news of the Chinese Cotton Association speaking out on the idea of Reserve selling obviously took a back seat today for whatever reason.  But back to selling rallies.  Today's action certainly moved prices right back to the heart of the range we've painfully enjoyed for the last several months.  After closing decidedly below the 100 and 200 day moving averages yesterday, the December contract closed back above those two benchmarks today.  Long story short, we probably are still going nowhere fast.  I do think that back above .6550 and certainly up toward .6650, I will be selling more cotton for our farm and encouraging those that have not sold any cotton to do so as well.  We might still be talking about cotton at .6500 this time next year, or even the year after, but gun to my head a dime higher at .7500 or a dime lower at .5500 come the heart of harvest season, I still say .5500.  But for now, .6300 is still too cheap in the eyes of some that are willing to put their money where their mouth is.  I believe those are the ones that buy because they think it's done going down, not necessarily because they think it will go up.