Ag Market Update - March 19, 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     

 

May 15 Cotton          .6341             .6172                .6295            + .0047        + .0188

Dec 15 Cotton          .6414             .6304                .6411             + .0044       - .0031

Dec 16 Cotton                                                         .6335            + .0071        - 0243

Dec 17 Cotton                                                         .6496            + .0071

Sep 15 Corn             3.9575            3.8650             3.8950          - .0100         - .3325

Nov 15 Soy              9.6400            9.4075             9.4625           - .0450        - .5925

July 15 Wheat          5.2300            5.0825             5.1575           + .0150       - .8175

 

Cotton LDP Payment (effective tomorrow) - 5.65 cents

Today's Market Report
 I wasn't able to file a report yesterday, but we certainly saw some fireworks as you can see by the cotton settlements above.  After closing lower thirteen out of fourteen sessions and seemingly on its way to a fourteenth in fifteen, cotton pivoted on a dime to the tune of a more than 200 point gain.  Today, a very impressive export report gave credence to yesterday's explosion and Voila! cotton has a two session winning streak.  May cotton settled up 47 ticks today, closing at .6295 while new crop December was higher by a like amount, up 44 points at .6411.  Basically EVERYTHING was higher yesterday on the heels of the Federal Reserve's comment that gave some concrete numbers as to when we can expect interest rates to rise.  With that news, the dollar which had been on a historic tear fell back, opening the way for all things commodities and equities, those things you can buy more of with a weaker dollar to explode higher.  Today, a slight hangover took hold in the markets and most finished the day lower.  Grains were slightly lower after opening the session some higher.  The stronger dollar and an impending large South American harvest were cited as the chief reasons for the small decline.  Analysts have indicated that a large sector of commodity markets experienced a key bullish reversal yesterday, but with most everything lower again today as the dollar rallies, we will have to pay close attention as to whether these reversals hold.  Personally, I think much of these gains were nothing more than dead cat bounces, as the dollar should find strength going forward, especially if we see the federal funds rate increase some into June and July as many expect.
Inside the Cotton Market
 I've said it a million times "Don't be short a dull market !" but I certainly wasn't paying much attention own words before that seemingly out of nowhere huge gain yesterday.  Spot cotton prices had slipped below .6000 for the first time in weeks and appeared headed to test the late January lows when seven sessions worth of declines were wiped out in about an hour.  The May contract easily took out the 40 and 100 day moving averages as if they weren't even there.  The good vibes continued this morning as the weekly export report showed that US merchants sold more than 238,000 bales of cotton last week as prices were declining and shipped nearly 300,000 bales.  One would assume that with prices being even lower this week that we should see another impressive report next week.  The fact that a whole host of countries were on the receiving end of those purchases is also very impressive.  The May market moved to .6341 up nearly 100 points, the highest level in 9 sessions, on the export news.  After moving back to unchanged on the day, the market regained roughly half of those points before settling.  While it does appear that, as I've said before, the market seemingly has a tentative floor around .6000, I believe we have a ceiling above this current range as well.  If the dollar does resume an upward trend as I mentioned in the previous section, cotton prices will have a hard enough time moving much higher than the current level.  If the dollar starts to trade a sideways range, cotton prices could move back toward .6500, possibly .6600, but not much higher than that I believe.  Once again, if we do move another 200-300 points in May or July, I believe we should use the subsequent 100-200 point rally in December to price a small amount of new crop cotton.  While the moves yesterday and today gave cotton growers a reason to breathe a sigh of relief, I think I will have to see a good bit more before I am ready to claim a recovery for our market.  For those that want to be aggressive with their 2015 marketing plan, I would suggest having small sell orders in at .6600 basis December and higher.