Daily Market Update - November 6, 2014

 

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 14 Cotton            .6464               .6252                .6319              + .0048             - .1524

Mar 15 Cotton           .6235               .6170                .6228              + .0041             - .1668

Dec 15 Cotton            .6567               .6533                .6584              + .0032             - .1297

Dec 16 Cotton                                                               .6801              + .0033

Dec 14 Corn               3.7450              3.6650             3.7125            + .0100             - .7900

Sept 15 Corn              4.0900              4.0250             4.0650            + .0175             - .5650

Nov 14 Soy                10.4400            10.1225           10.3100          + .1050             - 1.0400

Nov 15 Soy                10.1700             9.9650            10.0675          + .0275             - 1.2000

July 15 Wheat            5.5225              5.4475             5.4600           - .0425              - .9925

 

Cotton LDP payment (through Thursday) -    2.43 cents/lb.  (2.64 beginning tomorrow)

Cotton Harvest Price Option Insurance Price - .6400    (official as of last Friday)

 

Thursday's Market Report
If the agricultural markets are going to break as I have intimated they might, they just aren't ready to do so just yet as strong demand continues to keep grains buoyed and speculative buying is seemingly keeping cotton's head above water for some unknown reason.  Prices were marginally higher again today as spread action continues to dominate the cotton trade with the March contract taking the lead in volume yesterday.  December continues to bring more value even if everyone is now trading exclusively off of the March contract and she closed at .6319 today, up 48 points.  The more widely traded March contract settled at .6228, up 41 ticks.  Soybeans continue to make me look like a fool with my commentary as I just knew they were on the cusp on a precipitous decline when last I made an entry on Tuesday only to see prices rally more than 40 cents off yesterday's lows amid strong export sales, once again to China.  It appears that instead of cotton, now China has a fascination with stockpiling soybeans at the moment and until that subsides, prices probably will not want to break.  Corn prices, despite sluggish export sales, were fractionally higher by 1-2 cents.  Corn doesn't know whether to scratch its rear or wind its watch watching the back and forth action in the soybean pit on a daily basis.  There is a huge crop of corn out there but technically corn prices look somewhat firm.  I still say fundamentals ultimately win out and the upside is limited, although it is somewhat interesting to read that the Chinese corn crop has been confirmed as one of the smallest in a decade due to the strong drought conditions there during the early summer months.  In other news since our last report, I'm sure everyone is aware of the sweeping wins by the Republicans in the Congressional races on Tuesday night to win their party control of both houses and send a strong repudiation of President Obama's agenda, I do believe.  What they do over the next 24 months with this power they have been given by the people will certainly be interesting as will how the President works with this Congress.  Early indications from both sides are not very encouraging.  The impact on the markets while certainly not detrimental, will probably not be as beneficial as many might believe, in my novice opinion.  It might not belong in this space but I was also very happy to see Luke Bryan finally win a well-deserved CMA Entertainer of the Year last night in Nashville.  Luke's father, Tommy, has been a long time friend, customer, and supporter of McCleskey Cotton and it was great to see such great people enjoy a well-deserved award on the grand stage last night.
Inside the Cotton Market
 Much like soybeans as I mentioned above, just as I was ready to write cotton's obituary once again, the buyers came to the rescue yesterday and saved the day once again.  December prices touched .6202 before rallying unexpectedly and have been somewhat firm every since.  Exports were very mediocre today at 65,000 bales for 14-15 and a whopping 200 bales for 15-16, so that buying certainly wasn't the spark.  For now, it appears that cotton is just range bound, and probably will remain that way for the next several weeks.  We will see December options expire tomorrow and while in many years that would serve as a volatile situation, I don't see tomorrow being one of those days per se, because so many of the puts and calls are so far out of the money and essentially worthless.  The next big item on the agenda will be the November Supply & Demand report, which I don't see how in the world can be bullish, but will probably be a yawner nonetheless.  Then we have the First Notice Day for December, which many want-to-be bulls are pointing to because of the lack of certificated stock.  Personally, I think we will continue to see the certificated stock continue to grow as this crop moves out of the field in such a hurried fashion.  Again, another non-event.  Therefore, we will start looking at outside forces to maybe get a hint as to which direction cotton might move.  Energy prices?  Lower. Which equals lower synthetic prices. Not good for cotton.  Dollar index?  Highest level since 2010.  Not good for cotton exports, which were already on the rocks with Chinese cotton policy.  Believe me, I want to see something that points for higher cotton prices.  I just don't.  If anyone reads this letter and does, please point them in my direction.  For now, I see sideways price action for the next few weeks, followed by a slow, steady decline into the winter and spring months.
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