Ag Market Update - November 4, 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     

 

Dec 15 Cotton          .6289              .6180               .6194             - .0063          - .0248

Dec 16 Cotton          .6321              .6272               .6288             - .0014          - .0290

Dec 17 Cotton                                                         .6332             - .0014

Dec 15 Corn            3.8350            3.7650             3.8000            - .0050          - .4100

Sep 16 Corn            4.0300            3.9600             4.0050            + .0075         - .2750

Nov 15 Soy             8.8625            8.7850              8.8325           + .0475          - 1.2225

Nov 16 Soy             8.9175            8.8375              8.9025            + .0775         - 1.0175

July 16 Wheat         5.3425            5.1650              5.3100            + .0750         - .6600

 

Cotton LDP Payment -  4.86 cents

Today's Market Report
Haven't posted an update in a week and the markets have been more of the same in our absence as you might imagine.  Cotton prices have moved aimlessly among the tightening range of prices during the last week before moving lower today.  December cotton settled at .6194 today, down 63 points and the lowest settlement price since October 12th. Grain prices saw both sides of unchanged prices today, but closed mostly higher.  Wheat prices led the way, gaining 7-9 cents as the market was able to breach and hold the all-important 100-day average.  Soybeans were higher by 4-6 cents, while corn was basically unchanged on the day.  All of these closes were relatively friendly considering the strong performance in the US dollar on this Wednesday.  The dollar is up almost 800 points on the idea that the Fed will indeed raise rates in December.  For what it's worth, I am on record as believing that this will not happen as we are simply too addicted to cheap money in this country.  Simply look at the huge increase in the national debt since the recent lifting of the debt ceiling.  A huge increase on the interest on that debt is not something politicians are going to want to run on next year, in my novice opinion.  Outside markets were largely lower today with the stronger dollar including the energy markets which opened higher, but settled moderately lower. Crude oil is currently trading at 46.50, down roughly 1.50/barrel. Stock markets are also slightly lower.  The roller coaster that is the cattle market is whooshing lower once again today with both feeders and live cattle closing limit down. 
Inside the Cotton Market
We have touched on the dismal cotton demand in recent months and the idea that it will not better until we see lower prices many times in this space.  That said, when I was waiting on the cotton market to open last Sunday night as it had been raining for almost 12 hours here in Terrell County, Georgia, and which would be followed by another 12 hours of steady rain, it was hard for me not to be turning somewhat bullish toward the cotton market that we follow.  I guess that is why you can not let your view of the market be jaded by the little corner of the globe in which you inhabit as the market never really gave a passing glance to adding to the previous Friday's gains on Monday morning.  Once upon a time, I would simply roll my eyes when the term El Nino was bounced around, but after the weather that we've witnessed across the Cotton Belt in the last six weeks, I am now a firm believer.  More on that later.  As for the market itself, it has been more of the same since our last update.  The market moved higher last Friday, gaining 100 points on the idea of heavy rains in the Southeast, and just as fast, has given up those gains with interest during the first three days of this work week.  We didn't attend the ICA meeting in San Francisco last weekend, but the general mood of the meeting according to our sources was the continued lack of demand for cotton.  As we are seeing every week, mills around the globe are buying cotton hand to mouth and will most likely continue to do so as long as prices stay in this .58 - .68 range that we have endured for the last 13 months.  Most of the people that I talk with see no escape from this range for the foreseeable future and I tend to agree with that line of thinking myself. Technically, it would appear that cotton prices are in a tenuous position with today's weak close, but we have been through this same song and dance, over and over this season and the usual reaction is a move back into the heart of the range.  One reason I believe that the downside is probably limited is the aforementioned weather we spoke of earlier.  While West Texas has had a decent window of good harvest weather, it has been an ongoing nightmare here in the Southeast.  While we haven't experienced the destruction that North and South Carolina saw in early September, rain patterns have become a constant here in Georgia as we try to gather what were once outstanding cotton and peanut crops.  On November 4th, I should be looking out my window at a full yard of cotton loads to be ginned, upwards of 500 to 600 loads, and right now, I'm not sure we have enough loads to gin through the night and pickers will not be back in the fields before Friday in all likelihood.  Of course, there is a 60-70% chance of rain on Saturday.  This season is starting to remind me of my first year in the cotton business, the Fall of 1997, the last Super El Nino season.  I can honestly remember driving to work in late February 1998 seeing cotton being harvested in one field next to one being planted in corn.  Surely with the advances in technology and increased harvest capacity, we won't see that again but this weather sure makes you "remember when"!  There will continue to be strong demand for high grading cotton as some merchants do have prior sales on the books and there is and will be a scarcity of machine-picked high grades available.  Other than that, we look for a continued pattern of sideways, choppy trading going forward as we slog through this harvest season.  Hold a gun to my head and I'd say a push lower is more possible than a move higher, but that's pretty easy to say when the market closes on a 3-week low.  For the second week in a row there is little incentive to redeem cotton from the loan or take your LDP payment as it is projected to be equal to or slightly larger next week.  Ideally, we would like to see a push lower into next week, producing an attractive LDP rate for the 3rd week in November, when we could take advantage of a possible market rally along with a sizeable LDP.  For now, just do the only thing we can do as far as marketing or harvesting: Hurry up and wait.