Ag Market Update - November 9, 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     

 

Mar 15 Cotton          .6229              .6171               .6212             + .0038         - .0333

Dec 16 Cotton          .6334              .6312               .6323             + .0030         - .0255

Dec 17 Cotton                                                         .6340             + .0021

Dec 15 Corn            3.7550            3.6650             3.6775            - .0525          - .5325

Sep 16 Corn            3.9800            3.8875             3.8875            - .0800          - .3925

Jan 16 Soy              8.7200            8.6575             8.6675            - .0050          - 1.4300

Nov 16 Soy             8.8125            8.7325             8.7450            - .0450          - 1.1750

July 16 Wheat         5.2900           5.1050              5.1100            - .1900          - .8600

 

Cotton LDP - 4.84 cents/lb  (est. 5.52 next week)

Today's Market Report
Generally, have not been posting an update on Monday's but seeing as how that's about all we can do here at McCleskey Cotton today with the current weather situation, here goes nothing.  Most markets are experiencing a dour opening to the trading week, while cotton futures bucked the trends and closed slightly higher today.  On very large volume, mostly from spreading action between December and March, the December settled 24 points higher while the March edged higher by 38 points, closing at .6212.  Going forward, we will acknowledge the March contract as our spot market as that contract is now holding the largest portion of the open interest.  The grain markets have traded lower today, led by a large drop in the value of wheat and to a lesser extent (but more technically damaging) corn.  Wheat futures closed with losses of 19-21 cents per bushel as spec longs ran for the door as a larger US carryout of wheat is largely expected in tomorrow's monthly Supply/Demand numbers.  Corn futures were lower by 5-8 cents as export inspections for corn were dismal once again.  Much like cotton, corn continues to be hampered by less than enthusiastic buyers overseas as our dollar continues to trade in a strong fashion.  It should also be mentioned that the corn market has been hammered on each of the last four Supply/Demand reports, so many could be trying to avoid the rush and "hate corn early".  As for me, despite looking pretty woeful on the charts, I think I would close my eyes and buy some corn at these distressed levels.  I would think that we are still range-bound from 3.60 to 4.00 in corn, likely until next Spring, but buying the market down here makes more sense than selling it, I believe.  Soybeans were also lower today, dragged lower by its contemporaries in the grain pit.  Soybeans basis bids, as well as, export shipments continue to be bright spots in an otherwise dreary picture for the prices of the grain sector.  Outside markets are largely taking it on the chin today as the prospects for a December interest rate hike grow on the heels of Friday's constructive jobs report.  I am still skeptical of a rate increase, but signs are indeed starting to point in favor of such a move.  However, as you can see by today's 200 point drop in the Dow Jones Industrial Average, the powers that be on Wall Street will continue to poke its collective lips out at the idea of a tightened money supply.   The energy markets are fractionally lower today, with crude oil trading back below 44.00, and the livestock market roller coaster is alive and well with cattle futures again down the limit.
Inside the Cotton Market
While futures closed fractionally higher today, it has largely been a dismal performance for cotton since our last update on Wednesday of last week.  Despite torrential rains in the Southeast for the last three days that have once again delayed an already way-behind crop and the ideas supporting smaller crops in India, Pakistan, and China, it appears that demand, or lack thereof, continues to drive our market sideways to lower.  However, much like I mentioned in the above commentary about corn, it appears to me that cotton's downside from here should be pretty limited from the .6200 area in which we closed today.  Tomorrow's report for cotton should once again be interesting as traders will look for and likely expect a cut in the World crop size.  However, eyes will largely once again focus on the size of the US crop, its exports, and its projected carryout at the end of 2015-16.  I still believe that we will ultimately see an increase in the size of the Texas crop. On the flip side, the effects of the September storm damage from North and South Carolina should be realized in tomorrow's numbers.  Here in Georgia, I thought we were probably trending to a slightly larger crop than last month's 2.3 million estimated bales, but the current detrimental weather has certainly quelled that idea in my mind.  I would expect the US crop to fall somewhere near the previous number with losses in the Carolinas absorbed by an increase in the Texas number.  What USDA does with the current dismal demand situation for US cotton is the wild card, I would assume.  At the current rate of sales, there is simply no way we will export 10.2 million bales of cotton in this marketing year.  Whether the USDA stubbornly sticks with that projection will be interesting to see.  At the end of the day, I wouldn't expect the numbers to move the needle all that much.  If the numbers come out bearish on the surface, it will probably be a good opportunity to buy the market and vice versa, if they come out bullish, it will likely be a chance to sell some futures.  That has been case for last few reports and I don't anticipate much changing tomorrow.  More pressing concerns here at home is the continued terrible harvest weather that we continue to experience.  Most all of the cotton growing areas of Georgia and South Alabama have seen anywhere from 2 to 6 inches of rain in the last 48 hours, which came just as soils were starting to dry out from previous rain events.   Being optimistic that pickers will be able to return to fields by the end of this week if we get no additional rain, we will have had the opportunity to pick cotton exactly one day in the last fifteen.  Therefore farmers and ginners are sitting idle.  Here at McCleskey Cotton, we did not gin Saturday, Sunday, or today.  We will run tomorrow and likely be out of cotton until growers are able to get back into the fields, which is almost unheard of on November 10th.  I don't know how much yield damage has been done with the constant rain events, but I am quite certain that our quality will see a pretty severe hit when we are ultimately able to return to the fields.  Since October 29th, the sun has shone literally for less than 48 hours here in Bronwood, Georgia.  As you might can deduce, when weather forecasters mention a Strong El Nino next time, I will be listening intently.   Cotton prices should remain range bound going forward with demand issues hampering any real rallies, while tight stocks outside of China should support the market on breaks.  I'm trying my darndest to figure out how in the world I won't be typing these same words a year from now.  Right now, I can't come up with a plausible scenario that gets us out of this quagmire, literally or figuratively.