Ag Market Update - May 14, 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          .6673              .6559               .6653             + .0076          + .0353

Dec 15 Cotton         .6654              .6560               .6650             + .0071           + .0208

Dec 16 Cotton         .6600              .6598               .6600             + .0002           + .0022

Dec 17 Cotton                                                        .6759             + .0002

Sep 15 Corn            3.7475           3.6750             3.7450           + .0625           - .4825

Nov 15 Soy              9.3925           9.3175             9.3700           + .0250           - .6850

July 15 Wheat          5.1525           4.8075             5.1425           + .3275           - .8325

Today's Market Report
Break up the wheat party !! While most all commodities had a strong performance today, save the energies, it was the old beaten up July wheat contract that led the way by jumping more than 5% in one session, closing 32 cents higher on the day.  Cotton prices continued to build off yesterday's impressive gains, closing 76 points higher in the July contract at .6653.  New crop December tagged along for the ride as well, gaining 71 and settling at .6650.  Corn prices jumped on wheat's back today and finished higher by 5-6 cents, while soybeans were mixed on the day despite negative fundamental news.  Wheat prices were higher due to the weather problems plaguing the heart of the US wheat belt, along with short covering from the heavily-short speculative community.  Soybeans were sluggish due to a very disappointing export report and the fact that one noted agricultural economic firm called for a sharp increase in soybean acreage this year.  As I mentioned in previous updates, the speculator is so short both wheat and corn that I didn't think playing it for extensive losses at current levels was very smart, and that it wouldn't take a whole lot of negative weather for these markets to move higher quickly.  Weather for the largest portion of the Corn belt is conductive for both planting and germination now and for the extended forecast. But in the larger picture, it looks like buying commodities is back "en vogue" at the moment and I would guess most will be supported at current levels.  The one holdout today was the energy market as news circulates about shale producers increasing production once again, now that prices are at multi-month highs.  It has also been a very nice session for the stock markets with the Dow up nearly 200 points.
Inside the Cotton Market
 After the initial negative reaction to the USDA numbers on Tuesday, it has been full speed ahead for cotton futures gaining roughly 200 points over two and half sessions.  I guess if you are looking for a fundamental reason for the market to move higher, it is getting now to the point of "too much rain" in cotton-growing areas of Texas, although I find a hard time buying into that argument.  I think the bigger picture commodity buying spree that has enabled cotton prices to rally is much more responsible for the move back toward the top of the well defined range that we've seen for nearly three months now.  Some might try to push the idea of a potential July squeeze like they do seemingly every single year, but as I see certificated stock increase each and every day, I find that a very unlikely scenerio.  We are seeing December move back toward the area where I think growers should start to price a portion of their 2015 production.  The December contract has failed right at .6700 four different times going back to last November and I see nothing out there that indicates we should be successful on this try, unless it just continues to rain and rain and rain in the Lubbock area.  While there are calls for rain events out there over the next few days, the long range forecast for the second half of May looks much drier.  Hopefully, that rain will shift eastward where most of the cotton-producing areas in the Southeast are now on the dry side of things.  In fact, there is a large amount of dry land cotton production in Georgia with cotton seeds lying in dry dirt waiting for a rain event so they may germinate.  I still think by June 1st, the US cotton crop will be off to its best start in 5-6 years Belt-wide, and for that reason and the technical reasons I mentioned earlier, pricing some cotton near .6700 and certainly if we power through .6700 would be a wise hedge for cotton producers.  Please give me a call if I can help you formulate a marketing plan on your particular farm.