Daily Market Update - September 22, 2014


by Ron Lee


Highway 118 West, PO Box 171

Bronwood, GA 39826





Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     


Dec 14 Cotton            .6440               .6222                .6259               - .0180            - .1584

Mar 15 Cotton           .6430                .6176               .6195               - .0234            - .1701

Dec 15 Cotton            .6660                .6465               .6503               - .0219            - .1378

Dec 16 Cotton                                                               .6626               - .0219

Dec 14 Corn                3.3150              3.2675            3.3025             - .0125            - 1.2000

Sept 15 Corn               3.6700              3.6275            3.6550            - .0200             - .9750

Nov 14 Soy                 9.5475              9.3425             9.3825            - .1875             - 1.9675

Nov 15 Soy                 9.6800              9.4700             9.5150            - .1900             - 1.7525

July 15 Wheat            5.1500              5.0325             5.0850            - .0350             - 1.3675

Monday's Market Report
 As one customer I spoke with today said it very succinctly, "This year is going to be all about one word: Survival."  And to reemphasize that point, we saw all agricultural commodities spend another entire session in the red with cotton leading the way lower.  Further clarification on Chinese cotton policy sent prices back toward the lows with December losing 180 points and closing at .6259, while March made a new low at .6195 and dropped 234 points.  Values for 2015 and 2016 lost more than two cents as well.  Soybeans, corn, and wheat were all lower today with soybeans suffering big losses.  November beans were down almost twenty cents and printed life of contract lows once again today.  Corn and wheat were only down one to four cents and rallied from intraday lows, but finished lower nonetheless.  The realization of a bumper soybean crop and a perfect 14 day weather forecast that will only bring more harvest pressure certainly weighed on prices today.  The recent, rather swift $1.00+ move lower in soybeans now has all row crop prospects for 2015 looking equally bleak.  Months ago, I mentioned that we were likely headed for the Odd numbered price sequencing if good weather held through harvest and $3.00 corn, $5.00 wheat, .7000 cotton, and $9.00 soybeans are mostly all now a reality.  Of course, cotton prices are now closer to .6000 than .7000 and I believe that once a good portion of the crop is harvested here that .6000 is not going to hold this market either.  Most other markets are enjoying the misery that row crops are experiencing today as well.  After making yet another record high to finish last week, the Dow Jones is down more than 100 points today amid widespread profit taking.  The dollar is roughly unchanged on the day, but its recent strength is keeping a lid on commodity prices for the time being.
Inside the Cotton Market
  While we got some clues last week on how Chinese cotton policy would work, comments made over the weekend only added to the bearish sentiment that has reawakened in recent days.  The news that the Chinese government would only allow imports of raw cotton at the WTO minimum standard sent Chinese cotton futures plummeting last night amid huge volume and that selling quickly escalated to the ICE futures platform here in the United States.  As we mentioned last week, the Chinese government is basically going to do whatever it takes for mills there in China to spin domestically grown cotton, either from new crop supplies or from its reserves and depend far less on imported cotton from countries such as the United States. At the end of the day, the Chinese policy likely means less exports for the US and ultimately a larger ending carryout.  Here at home over the last several days, West Texas continues to receive unwanted rains that most likely will at least have a negative effect on quality.  In any other situation, I would argue that those rains would be causing our market to rally some, but in this case, the negative Chinese news far outweighs the positive US news.  The December/March spread continues to be strong, but I believe that to be due to March's extreme weakness rather than December's ability to rally.  We do see certificated stocks continue to dwindle and with a later than usual crop besieged with possibly quality concerns, we could see this inversion hold or even strengthen in the short term.  As we mentioned before, any cotton that you can get ginned, classed, and offered is still going to be your best avenue on any cotton that you don't already have forward sold, as evidenced by this spread.  As I mentioned earlier, I do believe that once the pipeline starts to fill and if the US crop is what I believe it to be, the market still has another leg of downside, probably into the 50s and possibly down toward the .5200 loan level.  Anything other than that would just be a wild guess on my part.  As I mentioned earlier, this year will simply be a Survival year, and CRC crop insurance and LDP payments are probably going to go a long way toward helping producers survive. And 2015 just looks horrible from a crop planning perspective.  With inputs not coming down near consistent with commodity prices, virtually all Sunbelt row crops are below the cost of production as we look toward next year.  If fertilizer and seed costs don't start to break pretty soon, we could simply see a reduction in planted acreage next year as that might be the only option for some farmers.  They say it's always darkest before the dawn and right now it's pretty dadgum dark.  Unfortunately, I'm afraid that dawn may still be several hours away.
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