Ag Market Update - September 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          .6368              .6262              .6328              + .0066          - .0114

Dec 16 Cotton          .6270              .6235              .6216              + .0032          - .0362

Dec 17 Cotton                                                        .6326              + .0028          

Dec 15 Corn             3.6850           3.6400            3.6825             + .0525          - .5275

Sep 16 Corn             3.8675           3.8250            3.8650             + .0500          - .4150

Nov 15 Soy              8.8475           8.6875            8.7700             + .1050          - 1.2850

Nov 16 Soy              8.7375           8.6300            8.6775             + .0800          - 1.2425

July 16 Wheat          4.9400           4.8700            4.9200             + .0525          - 1.0500

Today's Market Report
After a much needed three-day weekend, most all markets have traded higher on this Tuesday as Chinese markets were higher Sunday night and yesterday as our markets were closed for Labor Day.  The cotton market essentially had a four-day holiday as volume on Friday during a "nothing day" was as low as I can remember at just above 7,000 contracts.  Cotton was higher for virtually the entire session today, trading as high as 100 points higher at one point, and December closed at .6328, up 66 at settlement.  Once again, December led the way trading at a premium to distant months.  The grain markets were all higher as well today, as traders look toward the September Supply/Demand numbers, due out on Friday at Noon.  Corn and wheat prices were higher by 5-6 cents, while soybeans gained 10-13 cents.  Broader market strength and a weaker dollar were cited as reasons for the gains by traders. hile the corn and soybean markets remain near long-term lows, I would guess that we will have to see significant yield reductions to relieve market pressure as exports continue to look dreadful when compared to 5-year trends and agency expectations.  The wild roller coaster that is also known as the Dow Jones Industrial Average is headed up the incline today, as the average is currently up more than 350 points on the day.  The S&P is up by 43 points as I type this.  The one market not participating in the volatility today amazingly is the energy market.  Crude oil is basically unchanged on the day at 46.00 and has traded a rather narrow range today, given its recent ride.  Several gas stations in the area have recently sold gasoline at the pump for prices less than $2.00, which always brings a smile to the face of consumers and makes for some comical television interviews with those consumers on our local channels here in Southwest Georgia.
Inside the Cotton Market
Cotton prices continue to drift back toward the heart of the old tried and true range, just as we expected it to do ahead of the September Supply/Demand report that should give us a firm direction, one way or the other, based on potential changes to the size of the US cotton crop.  While a 66 point gain seems rather mundane in the grand scheme of things, it should be noted that today's high exceeded the highs of the last eight trading sessions and the "doji" or T-pattern that the market put in on Friday's pathetic volume seems to have triggered some sort of reversal, at least in the short term.  When I don't have very much to say regarding the market, I will turn to what little bit of technical knowledge I have, as evidenced by the prior comments.  Also, technically speaking, the market seems to be attracted to the 40, 100, and 200 day moving averages which all reside between .6400 and .6500 like a magnet and my guess is that we move back into that range ahead of Friday's report.  Fundamentally speaking, there remains a dearth of information as we wait on the Northern Hemisphere harvest to commence.  There does seem to be growing evidence that the impending El Nino, one that some meteorologists contend will be a "Super El Nino" may provide an underpinning for prices as we head into harvest season.  The monsoons in India have been and continue to retreat, especially in the heavily sown Northern areas of India, which will negatively affect yields there.  Insect infestation, including pink bollworm and whitefly problems, continue to be running much larger than normal in India as well.  However, before somebody tells you that India is going to run out of cotton, remember that they still have several million bales of old crop cotton to sell and they basically were flat in acreage planted year over year.  The El Nino also threatens us here in the United States with a predicted wet Southern half of the country for the Fall/Winter.  While California which has all but dried up is eagerly anticipating the copious amounts of rainfall to hopefully recharge their water sources, those of us with a big cotton crop on the hook don't like the sound of a cloudy, wet October, November, and December as we try to gather that crop.  Again, all eyes are on Friday and the USDA's numbers, in which the trade is expecting a larger cotton crop than the eye-popping 13.1 million bales the scribes in Washington laid on us last month.  My guess is a 14.0 or larger crop would considered neutral at this point in time.  There are those out there that think the crop is as low as 12.7 million bales, while doomsdayers like myself think  the crop is closer to 15.0 million bales.  We will get the first idea who is closer to right come Friday.  Until then, those moving averages between .6400 and .6500 continue to look like a magnet to me.