Ag Market Update - June 25, 2015


by Ron Lee


Highway 118 West, PO Box 171

Bronwood, GA 39826




Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     


Dec 15 Cotton          .6568             .6411               .6538             + .0079          + .0096

Dec 16 Cotton          .6539             .6520               .6518             + .0064          - .0060

Dec 17 Cotton                                                        .6583             + .0064

Sep 15 Corn            3.8325            3.6850            3.8275            + .1125          - .4000

Nov 15 Soy             9.7975            9.5400            9.7775            + .2175          - .2775

July 15 Wheat         5.3300            5.1300            5.3200            + .2175          - .6550

Today's Market Report
Continuing the theme we mentioned on Tuesday, it was off to races for the grain complex once again today with corn, soybeans, and wheat all seeing impressive advances.  Cotton begrudingly tagged along for the ride and before it was said and done, the December contract had wiped out nine sessions of sideways trading with a 79 point advance, closing at .6538.  Volume which for the first 13 HOURS of the session was an embarrassingly low 1,500 contracts expanded to an respectable 24,000 by the end of the day once the buying showed up.  The focus again today will be on the grain markets as they continue to imply that a major low was scored for corn, soybeans, and wheat in recent days.  Continued widespread, unwanted rains dot the Corn Belt from West to East and with short covering buying going on in full force, these markets are rallying in a big way.  Soybeans continue to lead the way, and today moved and settled above all of the major moving averages as the November contract gained almost 22 cents, closing at 9.7775.  The fact that July options expire tomorrow isn't a coincidence either as the July market is gravitating to the $10.00 level.  Those that took a flyer on some 9.90 calls two weeks ago look like geniuses this afternoon.  Corn, while trading impressively, still has some technical ladders to climb before being mentioned in the same breath as soybeans.  Nevertheless, the September and December contracts were higher today by 11 cents and closed at three month highs with $4.00 corn seemingly in the cross hairs. It should also be mentioned that we are seeing a lot of investment money starting to shift to commodities, and specifically agricultural commodities from equity funds as many seem to think the 5-6 year bull run in the stock market could be coming to a grinding halt while many commodities look "cheap" when looking at historical levels. Exhibit A of "Buy because it probably can't go lower and sell because it probably won't go much higher".  Wheat was almost much stronger today up 10-14 cents and is reemphasizing the idea that wheat prices under $5.00 simply isn't a very good bet from the short side.  All eyes will now focus on Tuesday's USDA report on Planted Acreage and Quarterly Grain Stocks.  It will be very interesting to see how the market reacts both before and after this set of data is released.  I am still of the opinion that $4.00 corn and $10.00 soybeans should be sold, especially by a grower with no sales on the books but I would not at all be surprised to see these markets run a little further with so much bullish steam pent up at the moment.  Outside markets are deathly quiet as the time is running out on the Greek debt situation.  Without looking, I think June 30th is also a very key date with regard to that seemingly never-ending soap opera.  One market that did take it on the chin today was the feeder cattle market which fell to limit losses in the face of the sharp increase in feed ingredients, namely corn. 
Inside the Cotton Market
 You could almost see this rally coming in the cotton market today, regardless if you lean toward the bullish side or the bearish side of cotton.  At 9:30 am as we had only traded a handful of contracts, after several days of slow consolidation, and the grain market starting to take off like a rocket, the narrative was all but written.  The export report was another positive at 112,000 bales between this year and next, even if shipments were a hair disappointing.  By noon the December market was 100 points higher and the technical picture was once again looking positive.  Much like the grain markets, we will wait with eager anticipation for the report on Tuesday at noon whereby we will find out where the USDA thinks cotton acres have settled out.  Unlike corn and soybeans, we don't have a bullish weather argument to help augment the bullish undercurrent.  As I've mentioned in previous updates, with some areas are certainly needing a rain, the large majority of the cotton crop is off to a good start.  That said, it does seem as if the crop is somewhat late ( I nor the USDA seems to think it is as late as many do) and we will more than likely see weather scares between now and defoliation time.  Today's rally could certain be the beginning of a larger rally ahead of the USDA number that everyone assumes will show a pretty good reduction in the 9.55 million acres that we saw in March.  Many believe the number could be as low as 9.0 million acres.  I don't think we will see it and I don't believe it for fact, but if we were to see US acreage start with an "8", that would be psychologically bullish for the market. I still stick to my guns and say that growers should price a portion of their cotton if we can breach .6600 and move closer to .6700.  But as the market always seems to do, the larger picture seems to imply that their is a bullish undercurrent brewing with regards to row crop commodities.  The June 30th numbers along with July 4th holiday weather is always a very important period in the year for the agricultural marketer and this year is shaping up to be no different.