Ag Market Update - June 4, 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     

 

July 15 Cotton           .6595              .6494              .6512              - .0012         + .0312

Dec 15 Cotton          .6579              .6494              .6528               unch            + .0086

Dec 16 Cotton          .6598              .6593              .6604              + .0004         + .0026

Dec 17 Cotton                                                        .6745              + .0004

Sep 15 Corn             3.7100           3.6350            3.7025             + .0450        - .5250

Nov 15 Soy               9.2500          9.1200            9.2400              + .0900       - .8150

July 15 Wheat          5.2425           5.0400            5.2375              + .1300       - .7375

Today's Market Report
Despite most markets having a negative session on Thursday, agricultural commodities continued their recent pattern of higher prices amid short covering and scattered weather concerns.  Cotton prices actually finished fractionally lower, but extended yesterday's big gains for most of the session.  Both the July and December contracts pushed toward .6600 before late day selling took them into negative territory.  July closed at .6512, down 12 while December settled at .6528, losing 4 ticks.  The grains continue to trade in a strong manner and are on the verge of putting in their best weekly performance in recent memory.  Most of this buying seems to be technical in nature as the weekly export report for corn and soybeans certainly did the market no favors.  However, by the end of the session, corn and soybeans were up 3-4 and 9-11 cents, respectfully.  Wheat prices are certainly finding a bid and gained 13-14 cents today.  Wheat prices are now some 50 cents per bushel off the recent lows.  There certainly seems to be little reason to be short wheat below $5.00 as we've mentioned recently.  Weather, for the large part, seems to be ideal for all three grain crops save another round of strong storms in the lower wheat belt, which will delay harvest and produce quality concerns.  If you have corn and soybeans to sell, I would look for any additional gains to get some sales on the books if you haven't done so already.  While the markets look like they could stretch their legs technically, if the current weather patterns stay intact, it is just a matter of time before they roll over once again, in my opinion.  Larger markets are taking it on the chin today, specifically the stock,energy, and metal markets, even if the dollar index seems to be taking a well needed break today. For your daily update on Greece and its debt problems, they asked the IMF for a deferral on their upcoming debt payment.  Shocker, I know. 
Inside the Cotton Market
Maybe I read that Brock Report I posted on Tuesday one too many times or hearing about the horror stories in Texas, but I get the feeling that it may indeed be time to turn somewhat positive toward our beaten and bruised cotton market.  Now, I don't see anything out there right now that is going to take us back into the mid to high 70s imminently, but a return to the very top end of the 63-68 range does look promising.  While it is true that rain makes grain, or in this case, cotton, it does appear that acreage in Texas is going to come in much lower than we initially forecast.  And truth be told, we will never know exactly what that acreage number actually happens to be.  With insurance deadlines either having come and gone or on the horizon and so many acres untillable, some land will get planted in a "wildcat" manner and some land that we will count as planted will never have a seed dropped there.  This week and next look great for planting a crop and getting it off to a fantastic start, but for now, the lack of previously assumed cotton acreage is front and center stage.  The next issue that might come in on the side of the bulls is the possibility of a less than average monsoon season in India.   With basically all meteorlogists agreeing that the global weather pattern is currently in the El Nino phase (they do disagree on the severity of the El Nino), the usual result for India is a less than copious monsoonal season.  Right now the Indian government is expecting the monsoon to be at 88% of normal, down from their recent guess of 92%.  Add this possibility to the fact that certain parts of India are experiencing a historic heat wave, (130 degrees IN THE SHADE, at times!!), and it could be inferred that cotton production in the country of our biggest competitor might take a slight to moderate hit this summer/fall.  Thirdly, in talking with people across the state of Georgia, they seem to think that acreage is off more than I have previously guessed.  Some are indicating that the 20% acreage cut that I deemed loony on the part of the USDA might indeed be accurate.  I know those that sell peanut seed for a living would say that you might well run out a tank of gas before you find a cotton field.  Well, maybe not that extreme, but it does seem that it is harder to find a field this year than probably any in the last five or six years.  That said, with most all areas of the state getting a good amount of rainfall this week, the crop should be off to a very good start.  We seem to get some sort of crop concerns each and every year and I may be totally misreading these issues, but they do give me reason to, at least not be as bearish the cotton market as I have been for, going on, months now.  We will need to watch this market very closely between now and the Fourth of July holiday.  If we make another move toward .6700 in the December contract, this push may have enough steam to take the market to new highs.