Ag Market Update - February 29, 2016

 

by Ron Lee

 

Highway 118 West, PO Box 171

Bronwood, GA 39826

Work:229.995.2616

Mobile:229.881.3903

ronlee@mccleskeycotton.com

www.mccleskeycotton.com

Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     

 

May 16 Cotton          .5775              .5605              .5615              - .0035           - .0796

Dec 16 Cotton          .5690              .5581              .5591              - .0028           - .0881

Dec 17 Cotton          .6066              .5997              .6032              - .0018           - .0413

Sep 16 Corn            3.6850            3.6525            3.6525            - .0200           - .1000

Nov 16 Soy             8.7825            8.6900            8.7050             - .0300           - .1225

July 16 Wheat          4.6125           4.5200            4.5275             - .0750           - .3050

 

Cotton LDP Payment - 7.34 cents/lb 

Today's Market Report
Just an abbreviated edition today....Yesterday I indicated that the policy regarding the auction of the Chinese Reserves was imminent and likely to be revealed last night/this morning.  However, as I watched quotes during the night and into the morning, only to see prices trade a 10-30 point range after yesterday's huge range and volume, I thought something might be amiss there.  Indeed, it now appears that the Chinese will delay this decision to sometime during the middle of this month, perhaps sometime around the March 18th date.  What does all of this mean?  To me, it just means another 2-3 weeks of no clarity to this situation and for the first two months of the year, no clarity has meant lower prices.  Today, the market had something for everyone as we opened sideways to lower.  Around the traditional 10:30 opening, we saw prices move orderly but swiftly higher, up 120 on the day at .5775.  At that point, everyone that had sold the market yesterday had a loss on their ledger.  However, the market fell just as quickly as it moved higher and we settled the day with small losses in both the May and December contracts. Volume was healthy at roughly 36,000 contracts.  My personal opinion is that we will likely trade this market in a sideways fashion from .5400 to .5800 until those details in China are known.  Of course, as I mentioned yesterday, it would appear that some already know the details of this deal as many contracts that they are selling.  We saw open interest expand by more than 7,000 contracts yesterday and some believe that Chinese speculators are actively involved in our ICE futures market, obviously from the short side.  Prices on the Chinese exchanges continue to grind lower and despite the lower prices, most merchants still believe that very little US cotton is finding its way into export markets, even at these depressed prices in favor of cheaper Indian and West African growths. While we are at six-year lows for cotton prices and yesterday's low did look like an exhaustion low, many fundamental factors in the short term are still bearish.  I do still believe that December cotton at .5600 is cheap, relatively speaking however. We will see what that does to acres, but another 2-3 weeks of sideways to lower prices certainly isn't going to attract any cotton dirt.  As for our other markets today, grain futures are lower across the board with corn down 1-2, beans down 2-3, and wheat down 6-7.  The stock market is having a tremendous day, up more than 300 points and crude oil hit a one-month high today at 34.75.  The next upside target would be $36 and then substantial resistance both technically and psychologically at $40.00.  Unless something crazy happens tomorrow, our next and final update for the week will be on Thursday.  
Inside the Cotton Market
 Comments will return Thursday.