Ag Market Update - March 3, 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           .6463                .6352               .6363               - .0122           + .0256

Dec 15 Cotton            .6585                .6496               .6512               - .0096           + .0070

Dec 16 Cotton                                                               .6350               - .0095           - .0228

Sep 15 Corn               4.0725              4.0025             4.0675             + .0325          - .1600

Nov 15 Soy                9.9000               9.7800            9.8775              + .0250          - .1775

July 15 Wheat           5.1050              4.9675             5.0975             + .0575          - .8775


Cotton LDP Payment - 2.52 cents

Today's Market Report
 It's certainly been a while since our last update due to travel, internet issues, etc, but aside from today's 122 point move lower, the cotton market has been pretty content to trade the recent range in our stead.  While volume was pretty moderate today at less than 20,000 contracts, that doesn't take away the sting of a .6363 close in May cotton, down the aforementioned 122 points or the .6512 close in December, which dropped 96 ticks.  Grains were lower as well until a late day buying spree pushed corn, soybeans, and wheat all into the green.  Corn jumped by three cents across the board, while new crop soybeans finished higher by a like amount.  Wheat futures were the strongest, up five to six cents on the day.  Soybeans continue to find some strength as the trucker's strike in Brazil ebbs and flows, but it would seem that common sense tells you that bullish bullet point will eventually play out. Outside markets were pretty dull today.  The US dollar continues to make our exports of commodities less than desirable as it continues to strengthen.  While the dollar was fractionally lower today, we are trading at more than 11 year highs for the greenback and a further advance is likely, technically speaking.  Stock markets continue to be healthy, with the NASDAQ closing above 5,000 for the first time yesterday.
Inside the Cotton Market
 There was no specific news that I am aware of that caused cotton prices to plummet today, although the Chinese market was substantially lower as well last night which may have had an outside influence in New York today.  With the speculators now firmly on the long side of cotton, while the trade continues to forcefully sell the market, we had developed a similar trading pattern over the last couple of weeks; that was until today.  The past few weeks have seen the markets move lower during the night session as merchants made what I would assume to be sales of foreign growths, while speculators bought more contracts when they got into work the next morning.  So for some time now, we have seen the market open lower, but close somewhere near unchanged to higher by the end of the session.  That certainly didn't play out today as the market was at its weakest near the close of business?  Are the speculators starting to give up the rope?  I wouldn't think that they would just yet, as they look and see certificated stocks continue to be dangerously thin at just under 9,200 bales.  We did see 1,100 or so new bales certificated today, so it will bear watching if this number continues to climb.  The other bearish point out there is the huge slowdown in export demand, which was the catalyst for getting this market off the lows in the high 50s earlier this year.  If we continue to see cancellations, there isn't a whole lot out there for the speculators to use as a fundamental reason to continue to buy contracts of cotton.  There is also the large Chinese stock and growing Indian stock hovering over the market.  As far as new crop goes, it should generally follow the path of May and July, at least until we see some firm evidence of planting intentions.  However, it should be noted that key growing areas of West Texas have indeed accumulated pretty substantial moisture over the last several weeks via snow pack and that huge area of production will likely get off to a better start than any year in the last 5 years.  I continue to think we are looking at a very range bound market.  I don't think the market can risk going back toward the lows where the US would eventually sell out of cotton, but I certainly don't see the argument for taking cotton prices back above .6700 for an extended time.  Personally, I think I'd be a buyer at .6200 cents and lower and a firm seller at .6600 and higher until I learn something that I don't currently know.