Daily Market Update - October 23, 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            .6330               .6198                .6304               + .0036           - .1539

Mar 15 Cotton           .6214               .6135                .6188               - .0004            - .1708

Dec 15 Cotton           .6555                .6515               .6547                - .0008            - .1334

Dec 16 Cotton                                                               .6828               - .0008

Dec 14 Corn               3.6025              3.5100             3.5975             + .0675           - .9050

Sep 15 Corn               3.9650              3.8825             3.9650             + .0625           - .6650

Nov 14 Soy                9.9425              9.5600             9.9325              + .3050          - 1.4175

Nov 15 Soy                9.9250              9.6900             9.8975              + .1550          - 1.3700

July 15 Wheat           5.5700              5.4725            5.5525               + .0550          - .9000

 

Cotton LDP payment (through Thursday) -    2.17 cents/lb   (2.70 beginning tomorrow)

 

Thursday's Market Report
 There was pretty much something for everyone today on this Thursday, but here at the close of business nearly every market, save the distant months for cotton finished well into the green for the day.  The big winner once again were those that took a gamble on some extra cheap November soybean calls one day before they expire.  November beans, once down nearly a dime per bushel finished the day more than 30 cents in positive territory for no apparent reason other than to give soybean call writers a severe case of indigestion, not to mention a call from the margin man.  Tomorrow should certainly be a most interesting day in the soybean pit.  Again, for those that plan to grow a large crop of soybeans next year, this is a hedging opportunity in my opinion.  We are harvesting a near record bean crop here in the US, Brazil is forecasted to get very good rains over the next two weeks, and we will probably increase soybean acreage by more than three million acres in the US next year; yet soybean prices are rallying?  Somebody will have to explain why they are not pricing soybeans at profitable levels to me.  Corn and wheat followed soybeans path higher today, both gaining more than a nickel per bushel, but make no mistake: the soy complex was again the star of the show today.  Cotton gained 36 points in December but was off minimally in March, May, and July.  More on that later.  Once again, the stock markets posted huge gains with the Dow up 216 and the S&P up 23.  Crude oil prices also saw large gains for the first time in a while.  In general, it was just an "Up" day for everything, even if the dollar didn't drop at all.  How we can sustain this, you'll have to ask somebody much higher up the pay grade than myself.
Inside the Cotton Market
  The long and short of it with cotton prices today is "I don't have a clue".  Prices closed very weak yesterday and were on the defensive last night and into this morning.  A decent, but nothing to write a front page article export report (79,000 bales) did nothing to turn prices around and when the old low at .6210 in December was breached, it seemed pretty logical that we would take a pretty nasty spill.  But as "Contrary Cotton" has done so many times in the past, just the opposite happened and we made a new "dink" low and moved gradually higher for the balance of the session and December ultimately closed 36 points in the green on the day.  I'm sure that it was just coincidence, but right when cotton was on its lows for the day, I happened to be looking at the Lubbock, Texas extended forecast which shows a low temperature of 30 degrees for November 4th and 5th and be somewhat bullish for cotton prices I would assume.  While that is about the normal time for the First Frost in West Texas, it is my understanding that the crop out there is abnormally late and could certainly stand a later frost date to reach ultimate potential.  I may be really reaching for reason that cotton prices rallied today and two week weather forecasts are worse than unreliable, but that's about the best I can come up with today.  The crazy manner in which the December/March spread has performed over the last 2-3 weeks, I don't think anyone can explain.  Perhaps the December market just moved higher today because all of the other markets moved higher.  Either way, I wouldn't make heads or tails out of today's price action and the bears are still firmly in control in the grand scheme of things.  Cotton continues to be harvested at a rapid pace from Arkansas to Eastern North Carolina and its just a matter of time before West Texas is going full bore as well.  For now, the grains have managed to put in a early harvest season low and make a pretty nice rebound.  Can cotton do the same?  It will certainly fool me if it does.  But saying that, corn and soybeans have certainly surprised me with their actions, so maybe "contrary cotton" will strike again.
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