Daily Market Update - October 29, 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            .6599               .6417                .6535               + .0088           - .1308

Mar 15 Cotton           .6382               .6255                .6322               + .0038           - .1574

Dec 15 Cotton            .6690               .6620                .6639               + .0021           - .1242

Dec 16 Cotton            .6837               .6837                .6841               + .0008           

Dec 14 Corn                3.7600            3.6250              3.7525             + .1075           - .7500

Sept 15 Corn              4.0975             4.0050              4.0925             + .0875           - .5375

Nov 14 Soy                10.4500           10.0400            10.4300           + .3500           - .9200

Nov 15 Soy                10.2225            9.8725             10.2075           + .3025           - 1.0600

July 15 Wheat            5.6750             5.5825              5.6575             + .0525          - .7950

 

 

Cotton LDP payment (through Thursday) -    2.70 cents/lb.  (est. 2.54 next week)

 

Wednesday's Market Report
 The buying continued across the spectrum for agricultural commodities today even as huge crops continued to be harvested across the country, from cotton to corn, from soybeans to wheat and, at least for the short term, the American farmer continues to reap the benefit.  Cotton prices really moved again, especially in the December contract where the speculator continues to inexplicably add to a newfound long position.  December gained 88 points and closed at .6535, the highest settlement since September 17th.  The back of the board was dragged higher somewhat, but December was the main feature of the rise in prices.  Once again, the star of the show today was the soybean complex.  Soybean futures exploded for gains of 30-36 cents, led again by soybean meal prices which eclipsed the $400.00/ton level after failing there yesterday.  November soybeans settled at 10.43, up 35 cents, while beans for next November gained 30 and closed at 10.20 3/4. Apparently, rail problems causing the inability to get soybeans to crushers have led to technical triggers for this huge price spike, certainly not the lack of supply of actual soybeans.  I may be ultimately proven dead wrong (won't be the first time), but I think that once this logistical logjam is situation, this price spike is going be looked back on as a HUGE pricing opportunity for soybean producers, both in 2014 and 2015.  Now, I wouldn't go out and price every soybean you intend to make in 2015 because we could always have adverse growing weather and make insufficient yields, but if we were to have similar weather in 2015 as we've seen in 2014, the chances of soybeans bringing 10.00+ are beyond slim and none.  Corn and wheat prices are being pulled along by the soybean phenomenon and I think this is a pricing opportunity for corn as well.  If you plan to grow corn next year, December corn at 4.16 stored in the bin could obviously turn into $5.00 corn.  Considering that many Midwestern farmers are still delivering corn right now out of the field at prices below $3.00, don't you think that is a good deal should we get a repeat of 2014 weather next season?  Folks, there simply isn't a shortage of this stuff !!!  I hope we see soybeans go back to $13.00, corn back to $6.00, wheat to $8.00, and cotton to .8000; the speculator certainly has more money than I do sense, but for the life of me, I just can't imagine how this can all come together.  Outside markets were all focused on the comments coming from the Federal Reserve meeting and apparently the investors didn't get exactly what they wanted as stocks pared gains and moved into negative territory, while crude oil inched higher.  The Fed indicated their desire to EVENTUALLY end their bond purchasing program as the US economy continues to strength, especially when compared against other world economies.  The dollar rallied moderately on the news.
Inside the Cotton Market
 After claiming that we would be making boring entries here for the next few weeks, the cotton market went today and traded at the highest level we've seen in in more than a month, so that shows what I know, I presume.  Anyhow, the speculator (I assume) jumped back in with both feet on the long side of cotton today, running December prices as high as .6599 amid extremely heavy volume considering the sluggish volume of recent days.  For the life of me, I can't understand why the speculator is wanting to get long December cotton when it is inverted 200+ points over the rest of the board when huge, high quality yields are being made all over the cotton belt, but as a cotton producer and ginner, who am I to ask him to stop !!  Remember, most the time, a speculator doesn't know whether he is trading cotton, canola, or cotton candy; all he is looking at is a chart and right now, it looks like cotton prices have probably bottomed and if you bought cotton the last 2-3 days, you have a profit in in, so by all means, lets buy some more !  Some letter writers are indicating that the market is moving higher because of increased export demand and from what I can tell, nothing could be further from the truth.  I guess we will see in the morning when the export report is released at 8:30 am, but unless we see a big sales number in excess of 250,000 bales, I wouldn't give fundamentals any kudos for this recent rally.  For those that have high quality cotton already ginned, this is a prime opportunity, in my opinion.  We had several recaps fetch near or above .7000 today when you combine the market, the basis, and the LDP.  Considering that we were resigned to selling some cotton for .6500 or less just a few weeks, I think this a very good opportunity for growers.  The faster this pipeline fills, the quicker the market moves back toward the lower 60s I would assume.  The contrarian in me does wonder if prices will move significantly lower when there are so many guys that didn't want to sell their cotton at .8000 and now is certain that cotton is going to .4000 and doesn't want to take his LDP because he is certain that it's going to get bigger. The Chinese equation that brings cotton into the country even with the import duty at that level may or may not keep prices from moving lower than that, but I do think we eventually AT LEAST revisit the lows.  Just as I said for soybeans and corn earlier, there simply isn't a shortage of this stuff.  There isn't even a shortage of high grade cotton any longer, in my opinion.  I do think these speculators that are jumping back in on the long side are eventually going to get chewed up and spit back out, but for now, as a grower, take advantage of this price move higher and sell your extra production.
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