Daily Market Update - October 14, 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            .6565               .6401                .6416              - .0086            - .1427

Mar 15 Cotton           .6298               .6191                .6205              - .0045            - .1691

Dec 15 Cotton            .6645               .6558                .6563             - .0056            - .1318

Dec 16 Cotton                                                               .6929             - .0068

Dec 14 Corn               3.5750             3.4300             3.5700            + .1100           - .9325

Sep 15 Corn               3.9425             3.7975             3.9225            + .1025           - .7075

Nov 14 Soy                 9.7050             9.4325             9.6475            + .1950          - 1.7025

Nov 15 Soy                 9.8450             9.6000             9.8125            + .1900          - 1.4550

July 15 Wheat            5.3600             5.2375            5.3575            + .0600           - 1.0950

   

Cotton LDP payment (through Thursday) -    2.29 cents/lb 

 

Tuesday's Market Report
Just as it was when we left off last week, the word of the day is still "Volatility".  Over the last several days we have seen huge gains in the grain markets, massive selloffs in the crude oil, cattle, and stock markets, and the cotton market just trying to make up its mind which way it wants to go.  After moving even higher today after strong gains yesterday during a low volume, holiday session, the market sold off hard late and finished with moderate losses.  December cotton dropped 86 points, settling at .6416, while March lost 45 ticks at .6205.  During the session, December traded as high as .6565 and just below our first group of GTC orders at .6575 (naturally).  The grains have been a totally different animal over the several sessions, scoring huge gains amid enormous technical buying on the part of speculators.  Corn prices were higher by 9-11 cents today and have gained nearly 40 cents in the last 7 sessions moving from 3.19 to 3.57 in the nearby December contract.  Corn for next September delivery now stands at 3.92 and by my crude technical analysis it looks like prices COULD move another 8-10 cents into the $4.00 range before seeing significant resistance.  I still believe this is nothing more than a technical bounce in a longer trending bear market and growers that will be planting corn next year should price 25-30% of next year's production in the $4.00 area as tough as that sounds.  I don't think we have seen the last of lower prices in the corn market just yet.  Same goes for the soybean market, and I would be even more aggressive there.  Soybean prices moved 19-20 cents higher today after a similar move yesterday.  With the ability to price soybeans at nearly $10.00 for next season, I will be pricing production tomorrow on a higher market.  Again, I think these moves are purely technical in nature.  With clearer harvest weather in sight now for the Midwest and the chances for rain growing in Brazil next week, these are pricing opportunities for corn and soybeans.  We may also be entering into a period of deflation as evidenced by the tremendous breaks in the stock markets and in crude oil recently.  That would only further emphasis the need to at least forward contract a small portion of next year's production.  Crude oil prices are down nearly $4.00/barrel today at 82.00 and we could see gasoline prices start pushing toward the $2.50 area at the pump in the near future.  
Inside the Cotton Market
It continues to be one step forward, two steps back for everything associated with cotton.  The market, the harvest, you name it and frustration is the name of the game or so it seems.  The weather that has been plaguing the Mid-South's bumper crop over the last few weeks arrived in the Southeast yesterday and today and brought with it a rain that we haven't seen here at our location all year.  After about 10 days of good harvest weather and the first few days of the opportunity to see some good grading cotton, we were welcomed this morning with a heavy deluge of rain, wind and lightning galore, and dark skies to last the entire day.   Here at the gin, we have received nearly 4 inches of rain and it has just stopped in the last hour or so.  Boy, what I would have given for this on July 14th instead of October 14th! Most locations in Georgia have received 2 inches or more and harvest will certainly come to a halt for the next 1-2 days at a minimum.  Growers in the Mid-South are already resigned to the fact that Mother Nature has cost them quality, if not some yield.  Growers in Arkansas certainly lost yield via hail storms that blew through a section of counties so nights ago.  With this being the first heavy rain to hit the Southeast, it is my hope that we can still harvest a high quality crop if the weather cooperates the rest of the way and the 14 day forecast is favorable.  Looking back briefly at last Friday's report, I would generally deem it to be a bearish report.  Despite reducing the US crop by 200,000 bales (questionable in my opinion), both world ending stocks and more importantly world ending stocks outside of China were increased again.  That leads me to where I think I'm headed:  If every mill in the world is short term short of cotton, if most every merchant is short-term short of cotton and certainly short of high grades, if the weather will not cooperate and the crop keeps getting later, shouldn't the market be doing better than 65 cents?  Three times we've tried to take December through .6550 to no avail on a closing basis.  What's more, what does all of this say about March, May, and July when mills and the rest of the world will certainly be flush with cotton?  Short term, I still say there's a chance we can move higher.  Longer term, I'd say there's a better chance of the Falcons winning the Super Bowl.  Anybody watched them lately?
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