Ag Market Update - October 8, 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           .6245             .6144               .6172             - .0033          - .0270

Dec 16 Cotton           .6266             .6200               .6227             - .0028          - .0351

Dec 17 Cotton                                                         .6438             - .0032 

Dec 15 Corn             3.9575           3.9050             3.9175            - .0400          - .2925

Sep 16 Corn             4.1050           4.0550             4.0650            - .0425          - .2150

Nov 15 Soy               8.9175           8.8000             8.8100           - .1000          - 1.2450

Nov 16 Soy               8.9900           8.8900             8.9175           - .0750          - 1.0025

July 16 Wheat           5.3500           5.2500             5.2675           - .0500          - .7025

 

Cotton LDP Payment - 7.68 cents  (6.78 next week)

Today's Market Report
I guess I need to learn how to read a calendar as I indicated on Monday that we would be digesting a fresh set of Supply/Demand numbers from the USDA today, when in fact those numbers will be released tomorrow at Noon.  To that end, today's action in the agricultural commodity sector seemed to be one of classic "position evening" as cotton, corn, soybeans, and wheat, all of which have seen recent gains lost ground today as traders either banked recent profits or stepped to the sidelines.  Cotton prices, which have done a whole lot of nothing since we last spoke, lost 33 points in the December contract to settle at .6172.  I remarked on Monday that we would have a hard time pressing through the .6280 level and thus far, .6250 has provided a short term ceiling.  All three grain markets were lower today: corn by 4-5 cents, soybeans 7-10 cents, and wheat 3-6 cents.  December corn came within a 1/4 cent of the magical $4.00 mark in December yesterday before staging what many would term a "reversal".  Soybeans have moved sideways in recent days, and haven't really challenged the $9.00 level in some time.  Tomorrow, the trade seems to be looking for a slightly smaller corn estimate and a fractionally higher soybean estimate, based on early yield results.  A corn carryout estimate of 1.52 billion bushels and a soybean number of 415 million have been deemed neutral expectations.  Personally, I would think that soybean number would be received as positive but the news outlets still aren't calling , wanting my opinion.  Shocker, I know.  In outside markets, the ones that have been under pressure for a while now are having a good day.  Crude oil, the Dow Jones, and even the cattle market are all moderate to sharply higher.  Crude oil quietly moving with an earshot of $50.00/barrel and making our idea of $38.00 crude looking less and less likely for the meantime.  However, the downward trend in crude has yet to be violated according to the chart monkeys.  The stock markets are up nearly 1% on the day as the world economy seems as if it to the next calamity in fairly good shape.
Inside the Cotton Market
There certainly isn't anything like a bright sunshine and blue skies in the early Fall to make a farmer feel better, especially when he hasn't seen either in nearly two weeks.  Late Tuesday, the weather took a turn for the better and yesterday and today have been spectacular in terms of harvesting much-needing-to-be-harvested crops in South Georgia.  While there have been isolated reports of sprouted cotton seed and damaged peanuts in our area, we are certainly faring far better than our neighbors to the north and east in the Carolinas where many acres will be zeroed out as total disasters.  Staying on the weather front for a second, we have seen rain showers and isolated heavy thunderstorms move into the panhandle of West Texas as they start to harvest their cotton crop as well.  While this rain is largely unwanted, there haven't been any reports of damage as of yet. Both yields and grades have reportedly been disappointing in the Mid South states thus far, according to numerous reports, which will probably only serve to further producers' disenchantment with cotton going forward.  I still think it too early to tell what type of crop, yield and quality wise we have here in Southwest Georgia but I will say the cotton looks better with each hour of open sunshine that passes.  If the weather forecast holds and if we are lucky enough to get two weeks of good weather, we will have a pretty good idea of what kind of cotton crop we are dealing with.  I remain cautiously optimistic.  As for the market, we continue to go nowhere fast although the technical case for a "rounding bottom" could be made I presume.  Today's export report was the best we have seen in quite a while at 207,000 bales, which makes sense considering that we were making contract lows when these sales were made.  China was once again noticeably absent from the report.  It should certainly be noted that a very unusually large sale of more than 350,000 bales for the 16-17 crop was made to Mexico in the last week.  It is entirely way too early to hazard a guess at what growers will plant come next Spring, but at least one group in Mexico seems to think sourcing (what I assume to be high quality) bales from the United States may be harder than one would think.  Again, a lot of assumptions in there, but nevertheless, it is certainly good to see that large sale in the export report.  As for the report tomorrow, most pundits are thinking that we should see something of a "status quo" report.  My thoughts are well known, at least by the few that read this report: I think the crop is bigger than the USDA does and I think exports will ultimately be lower than the USDA believes they will be.  It doesn't take a genius to deduce from that, that  I would be more bearish than most regarding the cotton market.  Of course, I hope that I am wrong in both of those assessments.  That said, aside from some huge disappearance of cotton bales in some remote warehouses in China (we have seen that happen before), I can't come up with anything plausible that should push this market past .6400 tomorrow.  We don't have any cotton here at McCleskey to sell as of yet, but if you do have some free cotton to sell and with the LDP set to move down by roughly a penny tomorrow afternoon, I would have my powder dry to POP/sell on any type of decent rally tomorrow.  I don't know of anyone that does, but say Farmer Brown had 100 bales of 31-3-36, 4.4 mic cotton in the house and the market for whatever reason rallied to .6350 tomorrow.  That cotton would probably be worth .6650 or so to a buyer. Add on a 768 point LDP payment and that rounds up to .7418 for a pound of cotton.  Again, a ton of hypotheticals in there, but If I were Farmer Brown, I'd be asking "Where do I sign?"