Ag Market Update - October 16, 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          .6395              .6287               .6385             + .0041          - .0057

Dec 16 Cotton          .6371              .6335               .6376             + .0034          - .0202

Dec 17 Cotton                                                         .6466             + .0014

Dec 15 Corn            3.7800            3.7250             3.7725            + .0175         - .4375

Sep 16 Corn            3.9825            3.9400             3.9725            + .0125         - .3075

Nov 15 Soy             9.1050            8.9725              9.0000            - .0525          - 1.0550

Nov 16 Soy             9.1250            9.0150              9.0250            - .0575          - .8950

July 16 Wheat         5.2150            5.0650              5.1000            - .0875          - .8700

 

Cotton LDP Payment - 5.30 cents per pound  (3.85 early estimate for the following week)          

Today's Market Report
It has been a pretty quiet day to close out the week in the commodity markets on this Friday. Cotton prices flirted with taking a turn for the worse today, but saved itself along the way and closed with moderate gains.  December cotton settled at .6385, up 41 points and roughly 100 points off the lows of the day.  Since the big move on Tuesday, cotton futures spent the remainder of the week consolidating about 50-60 points below the high, which happens to correspond with the 200-day moving average.  The grains were largely quiet today, although wheat prices were down 7-9 cents.  Good prospects for needed rains across the Lower US Wheat Belt was cited as the chief reason for the losses.  Corn prices traded a very tight six cent range today, and closed up about a penny across the board.  I do wish I would have listened to myself and sold volatility in corn futures about a month ago as it does appear that we are locked into a 3.60 - 4.00 range for the foreseeable future.  Soybean prices were lower today and after large recent gains have converged around the key $9.00 area. While a large soybean sale was revealed today, the worrisome feature remains the slow pace for export sales for all agricultural commodities versus last year's numbers with China's dragging economy frequently cited as the reason.  Outside markets are already enjoying the weekend or so it seems as little to no activity is going on in the final hours of the workweek, and most all markets look to settle the day in roughly the same manner as yesterday.  One market you do not want to sell volatility in are the livestock futures.  Just as I proclaimed the bullish cattle market was over and done, prices have taken off once again, closing at limit gains today.  This market is one wild roller coaster for sure.
Inside the Cotton Market
Not much to say about our market that we haven't touched on in previous conversations.  As I mentioned earlier, since the big 200 point move on Tuesday, the market has spent the last three days thrashing around between .6350 and .6400 on pretty good volume considering the tight range.  While it still feels like the speculators are going to take one more good shot at breaking through that key .6420 area, they had better hurry up and do so, or much of the gunpowder is going to be out of the proverbial bullet. Cotton prices seem to be fairly priced at the moment, as dull and boring as that sounds.  The market looks like .60 or .61 cents on the low end and .66 or .67 cents on the high end.  With the specs adding quite a number of contracts in the .6350 to .6400 range, you aren't playing for a huge windfall gain when the market is almost certainly capped two to three cents above.  That said, plenty of people have made a small fortune trading this tired ole range for going on twelve months now.  I don't see anything in the immediate future that will get us out of said range.  Once we have a better handle on the US crop, a directional bias will likely emerge.  One negative to our market, if you will look at the LDP estimate above, is the absence of Pakistan from the A Index calculation.  The A index is a big determinate in the value of the LDP and while Pakistan was selling cotton on the export market at a very discounted price, our LDP payment was inflated for the last several weeks versus historical terms.  India is the last country in the A index selling cotton at a significant discount.  If India were to sell out of cotton, we would see a further shrink in the LDP, even if the ICE futures price stayed constant.  Those that sold cotton earlier in the week and took the inflated LDP certainly did a good day's work.  I sure wish we had had more cotton to sell in this manner, but that's water over the bridge now.  We will see what next week holds as far as the market goes, but we are getting closer and closer to heavier hedge pressure hitting this market.  The weather is finally generally clear over the entire cotton belt and harvesting should hit a fever pitch by this time next week.  Here at the gin, we have ginned a touch over 5,000 bales as growers concentrate on peanuts and cotton that was defoliated after the 10-day stretch of Seattle, Washington weather that plagued Southwest Georgia is just now getting ready to harvest.  Current yields are a tad disappointing, but the cotton that is about to be ready looks very promising.  In talking to the trade, other areas of Georgia seem to be pleasantly pleased with early cotton yields.  Hope everyone has a good weekend, it will hopefully be the last idle one of the year here at McCleskey Cotton!