Ag Market Update - March 31, 2015


by Ron Lee


Highway 118 West, PO Box 171

Bronwood, GA 39826




Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     


May 15 Cotton          .6394              .6217              .6310              + .0058          +.0203

Dec 15 Cotton          .6495              .6340              .6434              + .0056          - .0008

Dec 16 Cotton                                                        .6330              + .0069          - .0248

Dec 17 Cotton                                                        .6491              + .0069

Sept 15 Corn            4.1325            3.9100            3.9200            - .1800           - .3075

Nov 15 Soy               9.6100            9.3300            9.5525            + .0600         - .5025

July 15 Wheat           5.3450            5.1225            5.1400            - .1925          - .8350


Cotton LDP Payment - 3.53 cents

Today's Market Report
 It was the typical "big report day" in agricultural commodities with every analyst (including me) arguing with the USDA numbers, wide volatile swings in the market, and ultimately the market dealing with the numbers provided it.  For cotton, the market basically did a upside down repeat of yesterday despite numbers that I would term neutral to very slightly bearish.  Much like yesterday when the market took an "out of the blue" 100 point plunge, today the May contract saw an "out of the blue" 100 point jump.  By the end of the day, May had finished up 58 points at .6310, while December gained by a similar amount, up 56 at .6434.  The grains had to digest both a Quarterly Stocks number along with the Prospective Plantings and while many will argue with the numbers, the market responded in a manner fitting with the numbers.  Corn acreage, despite being lower for the third consecutive year and at the lowest acreage since 2010, at 89.2 million acres was significantly higher than the trade expectation.  Subsequently, the corn market fell out of bed today to the tune of 17-19 cents lower.  We had orders in 5-20 cents higher on the expectation of a lower number and were certainly disappointed in the number.  Soybean acreage, on the other hand, was reported at 84.6 million acres, the highest number on record, but certainly below the trade expectation.  November beans closed six cents higher as a result.  Ultimately, I see final corn acreage lower and soybean acreage higher, but as I mentioned earlier, these are the numbers that the market will trade for the next 30 days or so.  We also saw another volatile swing in the wheat market today, with July wheat down nearly 20 cents.  While the number should have been mildly supportive at 55.4 million acres, wheat fell victim to the downturn in corn prices and profit-taking after the last two days of solid gains.  I will also mention peanuts in this space for those concerned with that market.  The USDA foresees peanut acreage at 1.481 million acres, with 720,000 of those being planted here in Georgia.  Personally, I think this number is a tad low as I expect that number to ultimately be closer to 1.7 or 1.8 million acres when you talk to those that sell peanut seed and see the inordinate amount of land getting prepared to plant goobers.  If I am correct and if we continue to see the peanut yield curve expand upward, we could possibly face a logistical nightmare with peanuts come this Fall.  In outside markets, we are seeing renewed strength in the US dollar and as a result, most all markets are experiencing a negative day.  Crude oil is once again playing defense as a result and the thought that sub $2.00 gasoline at the consumer level is once again a common thought among analysts as US inventories continue to be at record highs.  Stock markets, after a big day yesterday, are trying to keep from giving all of those gains back today.
Inside the Cotton Market
 Just as yesterday, I couldn't rightly explain the big drop in the market, I can't rightly explain today's jump.  Hey, maybe I should let somebody else try this gig for a change!  As for cotton, I said yesterday that the market expected a number somewhere between 9.2 and 9.7 with 9.4 being the average trade guess.  One would think the USDA number at 9.55 million acres would have been marginally bearish, yet the market closed higher, buoyed by a 100 point jump just after 12:30 pm.  The market sank some into the close, but for now, it would appear the test of the 20-day moving average at .6250 will provide support.  As for December, the chart action should be construed as positive with a lower low and a higher high than yesterday, along with the higher close.  Looking at the numbers, a few things certainly stand out.  Nobody really asked my opinion, but I think the Georgia number at 1.1 million is certainly on the low side.  I said yesterday that I expect 1.25 to 1.27 million acres of cotton in Georgia and I'll stick by that number.  Apparently, the USDA expects some 165,000 acres of Georgia to lay fallow this season as we planted 2.63 million acres to our field crops last year and they expect 2.497 this season.  With the land that has been cleared and put back into use, I just can't see this coming to pass, even with the low commodity prices.  I think the large amount of this difference will ultimately be planted to cotton with some to peanuts, even if the cotton is simply for insurance purposes.  The next thing that stands out to me is the tremendously low acreage attributed to cotton in the state of Arkansas.  There was a time not too long ago when it was a race between Arkansas and Georgia to see who would be second in line to Texas in cotton production.  Now Georgia has pretty well maintained cotton acreage, while Arkansas will plant only 230,000 acres of cotton, the lowest amount in memory.  Instead, Arkansas farmers are now planting an astounding 3.5 million acres of soybeans!  Lastly, and this will ultimately have as much to do with our December market over the next six months as anything.  It is a tad unnerving that the state of Texas is responsible for more than 60% of the cotton that we will plant in the United States this year.  We say it almost ever year, but the weather in West Texas certainly will guide our cotton futures market this year. How many of those acres are planted to fail?  How much actual subsoil moisture to those high yielding dryland acres have ahead of planting?  Can they get a good stand of cotton with little to no interference from Mother Nature?  Once they get a stand, can they get those 3-4 timely rains to make a bumper crop?  Even as I look at the bipolar nature of our market when we look at historic world stocks that will seemingly never go away versus a US balance sheet that remains marginally tight, it is a real crap shoot when you have so much of the country's acreage confined to one area and when only a US bale is deliverable against the ICE Futures market.  I consider myself to be more bearish that most when it comes to cotton prices going forward, but this certainly gives me cause to doubt myself somewhat in that belief.  I guess the main question I keep coming back to is, "Just how much effort is the West Texas farmer putting into making a bumper crop of cotton when he looks at his quote screen and sees 62 to 65 cents per pound (the price range I consider "No Man's Land") for his efforts?  I say it every year, but this year more than ever, you need to have any and all weather stations for a 200 mile radius around Lubbock, Texas bookmarked on your computer and check them religiously if you want to have a educated guess as to where this market might be headed.