Daily Market Update - September 24, 2014


by Ron Lee


Highway 118 West, PO Box 171

Bronwood, GA 39826





Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     


Dec 14 Cotton            .6277               .6102                .6157               - .0126            - .1686

Mar 15 Cotton            .6236              .6047                .6104               - .0144            - .1792

Dec 15 Cotton            .6451               .6367                .6411               - .0139            - .1470

Dec 16 Cotton                                                               .6890               - .0008

Dec 14 Corn                3.3000             3.2475             3.2950             + .0400           - 1.2075

Sep 15 Corn                3.6550             3.6100             3.6550             + .0400           - .9750

Nov 14 Soy                 9.4200             9.3425              9.3675             + .0050           - 1.9825

Nov 15 Soy                 9.5675             9.4850              9.5425             + .0200           - 1.7250

July 15 Wheat            5.1075             5.0200             5.0800              + .0325           - 1.3725

Wednesday's Market Report
 After a brief rally yesterday (if you can call 20 points a rally), cotton prices resumed their downward trend today, closing 126 to 151 points lower in current crop contracts.  The .6157 close in December is a contract low and on the continuation chart, you have to go back to September of 2009 to find a similar close.  It is safe to say that the bull market of 2010 to 2013 is most certainly over for agricultural commodities.  Grain prices were slightly higher today on what I can only figure is profit taking by speculative shorts.  While I certainly believe that harvest pressure will push corn and soybean prices some lower, for those with huge profits in those commodities, the risk probably isn't worth the reward at this point.  Corn finished the day at 3.29, up four cents and soybeans settled at 9.36, up a fraction.  While corn prices will probably ultimately challenge 3.00 and soybeans 9.00, we could see a bit of sideways action for these commodities in the short term.  What is certainly not good for the Midwestern grower of these staples is the basis levels they are dealing with.  With the huge crops they are now harvesting in the Midwest, infrastructure and logistics will keep the grower behind the 8-ball this fall.  Wheat prices were also a tad higher today, up three to four cents as I believe 5.00 should hold a further decline in wheat prices for now.  Like I said earlier, at some point down here, the risk will outweigh the reward for speculative shorts in grain prices.  That said, I think we are much more likely to see a sideways pattern in those prices rather than a V shaped rally.  Sharp rallies, if we see them, will continue to be sold until we get fundamental news to corroborate the technical action.  In fact, looking at the board today, most everything was higher with the exception of cotton and gold.  A stronger dollar, moving above 8500 couldn't keep most commodities from moving higher.  In what must be insult to injury for speculative cotton bulls is the firm, bullish nature of its fellow soft commodities, sugar and especially, cocoa.  The threat of further Ebola infections in several West African countries responsible the lion's share of the world's cocoa production has that market in a parobolic state at the moment.  The stock markets also shook off recent weakness and have surged higher today.  The Dow Jones finished the day at 17139, up 176.
Inside the Cotton Market
 There was nothing today on the surface that indicated that cotton prices should be down 150 points, but the fact of the matter is that our market is just catching up to the weakness in foreign markets and the cold, hard realization that we first mentioned 10 days ago that, barring a total about-face, the Chinese simply aren't going to need much of our cotton this year.  Looking below (and you might have to put your specs on) at the monthly continuation chart, it doesn't take a "technical analyst" to see where the next line of true support is.
Unfortunately, there really isn't anything on the charts to hold us technically until the 40 cent area if we finish the month at this level.  Now, I'm not sitting here saying that we are going to 40 cents in no time; just that technically, that's really where the true support lies.  After going in a mostly straight line from 40 cents to 2.27 cents, we might be headed the other way, full circle.  Fundamentally, we assume the sellers of the market overnight were from India and more specifically China, where both are expected to have bigger crops than the USDA is currently carrying at the moment.  Early crop yields out of West Texas are reported to be on the disappointing side but right now that unfortunately is the proverbial needle in the haystack at the moment.  Looking forward however, it doesn't get any more bullish in West Texas as recent rains from the Tropical Storm MAY have damaged the current crop, but left subsoil moisture at its highest level in several years as we look to the potential disaster that is 2015.  I'll stop here with the metaphors but When It Rains, it really does Pour.  We get the export report in the morning, but I've heard nothing of any real business in the last week and I doubt mills are really ready to step in here and try to catch a Falling Knife and will wait for prices to moderate before pricing or sourcing new bales.  The market may indeed try to consolidate in this 60 - 63 range for the time being as it attempts to shake some bales from growers hands.  However, I do think this will only be another consolidation area before we trade another leg lower.  On the bright side, for those that did contract cotton and are looking to harvest in the next couple of weeks, it looks like there will be an LDP payment to add to your contracted price.  Right now, that is about the only good news I can think of at the moment.


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