Ag Market Update - May 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     

 

July 15 Cotton          .6524              .6405               .6435              - .0057          + .0235

Dec 15 Cotton         .6548              .6451               .6483              - .0035          + .0041

Dec 16 Cotton                                                        .6483              + .0024         - .0095

Dec 17 Cotton                                                        .6635              + .0027

Sep 15 Corn            3.7550            3.6725            3.6925             - .0600          - .5350

Nov 15 Soy             9.3650            9.2225            9.2400             - .1100          - .8150

July 15 Wheat         5.2475            5.0375            5.1050             - .1125          - .8700      

Today's Market Report
With the US dollar back on a upward climb, it was a tough Tuesday for most all commodities, cotton included.  In our absence yesterday, cotton prices took a big tumble and followed through today with July cotton losing 57 points to settle at .6435.  December also finished in negative territory, down 35 points at .6483.  I hate to just keep repeating myself, but cotton is simply worth about 65 cents.  A penny or two below, buy the market, a penny or two above, sell the market.  Surely, it can't be that simple, but it certain has been for the last few months.  The grain market was lower as well today with both soybeans and wheat losing just north of a dime per bushel, while corn was down a little more than a nickel. Today's sell off, once again, was largely attributable to the dollar index, which is currently up more than 1100 points, but there was also some negative fundamental news that was specific to grains.  A frost threat for the Northern Plains was reduced to a minimum and yesterday's planting progress/crop rating showed a corn/soybean crop that was off to a very fast and promising start.  While there are potential issues out there for all of our row crops, looking at the board and knowing it is a FUTURES market, the market is telling me that it isn't the least bit worried about a shortfall in production at this point in time.  The biggest loser on the day due to the strength in our currency was the energy sector.  Crude oil is down more than $2.00/barrel, while both gasoline and heating oil are off by more than a nickel.  It certainly appears to this novice chart monkey, that crude oil put in a pretty significant top in the last couple of weeks near the $62.00 area.  The one sector that still doesn't appear to have much appetite for the downside continues to be the cattle market.  As I look on my main screen, cows are the one commodity that closed Tuesday in the green.  I guess I will just continue to be wrong about the bovines for as long as I write this report.  
Inside the Cotton Market
There really isn't much more than I can bore you with about cotton that I didn't say in the previous section.  We saw prices run back toward .6700 late last week, only to fail one again.  I've said it before and I'm certain that hedge fund managers are 1000x smarter than me, but it would appear to me that the cotton trade, for the most part, has played them like a cheap fiddle over the last several months.  Once again, the speculative community got too long while fundamentals are decidedly bearish for cotton and once they had bought enough, the air went out of the market like a cheap balloon.  That is about the fifth time this has happened since the winter months.  Once again, I'll say it one more time, today cotton is worth about 65 cents.  As for new crop, it followed July lower as well, even as it gets too hot and dry in the Southeast and too cool and wet in the Southwest.  And no I didn't get my areas of cotton production messed up there.  Another 2-3 inches of rain are forecasted for the Texas panhandle this week, while only scattered shower possibilities exist for our cotton growing area.  However, history tells us that Texas will ultimately get their crop in as they essentially still have a month to do so.  If we can get the balance of our acres planted here in the Southeast in the next ten days and then get a good general rain behind it and if Texas does get those acres in the ground, I'm just not sure where any bullish news will originate from.  Like a broken record, I still say cotton producers should price some production on those runs we get to 6600 to 6700 from time to time.  I really couldn't fault someone that wanted to price some at today's level.  I certainly can't predict the next 4-5 months of weather across the globe, but if you made me make a prediction, I say this market trades with a 5 in the front come November instead of a 6.  Should that come to pass, a sizeable LDP would come into play to add to the 65 cent price.  However, that potential LDP is also essentially a free put, so I could understand a grower not wishing to do any marketing while the December trades at this level.  Again, give me a call if I can help you at all with your cotton marketing plan.