Daily Market Update - September 3, 2014


by Ron Lee


Highway 118 West, PO Box 171

Bronwood, GA 39826





Agricultural Settlements

Commodity                 High                 Low                  Close               Change            YTD     


Dec 14 Cotton            .6617               .6515                .6596               + .0065           - .1247

Dec 15 Cotton            .6950               .6929                .6930               + .0008           - 0951

Dec 16 Cotton                                                               .7069               + .0008

Dec 14 Corn                3.6250             3.5125             3.5200             - .1175            - .9825

Sept 15 Corn               3.9775             3.8800             3.8800             - .1025            - .7500

Nov 14 Soy                 10.2875           10.1250           10.2000           - .1200            - 1.1500

Nov 15 Soy                 10.4200           10.2525           10.3125           - .1050            - .9550

July 15 Wheat             5.9425            5.7650              5.7800             - .1300           - .6725



Wednesday's Market Report
 After several days of moderate losses that returned cotton prices to the heart of the recent range, prices advanced today led by the December contract which gained 65 points to settle at .6596.  For the past couple of days, we have watched the December price gain on the March price which is generally counteractive to a bear market and this trend continued in earnest today.  For the grains, Wednesday was another bloodbath with new lows posted in corn, soybeans, and wheat.  December corn dropped almost twelve cents, as did November soybeans, which wheat prices lost more than a dime as well.  The realization of the huge crops that we have mentioned over and over again are once again laying on these markets and the USDA reflected this probability as they increased the crop ratings yesterday for both corn and soybeans unexpectedly.  The only card left in the bull's deck is the one that turns over an early frost, but right now, there just aren't any forecasters predicting one of these. Wheat prices were also pressured by the supposed cease-fire between Ukraine and Russia, although I would take that news/reasoning with an entire shaker of salt. The stock markets are mostly quiet today, while crude oil is posting a solid $2.00+ gain this afternoon.  The US dollar continues to maintain strength near 83.00, but is fractionally lower on the day.  One market that continues to maintain its bullish momentum is the cattle market.  Both feeders and live cattle finished the day nearly limit up.  While technical indicators continue to point to an ominous turn for beef prices, for now the markets remain very strong.  
Inside the Cotton Market
 It is hard to write a column about why cotton prices were higher today, just as it would have been hard to write one as to why it was lower yesterday.  The crop condition was lowered one percentage point yesterday, but I seriously doubt that is what led us to the gains today.  The market is back trading comfortably in the .6500 - .6600 range FOR NOW, after the recent move higher to .6771.  Technically, the 20 day moving average is pretty good support at .6525 but that line is starting to slope upwards and my bet is that the moving average will be hard pressed to support the market moving forward.  Key growing areas of West Texas and South Georgia have seen beneficial rains in the last 3-4 days, although most in Georgia will argue that the rain is too little, too late to help a dryland crop that was decimated by a hotter, dry August.  One friend of mine that has seen much more of the Georgia crop than I and whom I spoke with today is certainly confident that yields in Georgia will be 50-75 lbs/acre less than the current projection of 978 lbs/acre.  It would appear that the market is taking a wait and see attitude as well.  The most interesting action in the cotton market the last few days continues to be the December/March spread, which moved back to a slight inverse today.  As most of you are aware, in traditional bear markets, carry will return to the futures market, and while we do see fairly good carry in the March/May and May/July spreads, the December continues to perform better than those distance contracts.  While certificated stock continues to dwindle and many in the trade warn of a late crop which would contribute to the possibility of a short squeeze, I'm still not buying it completely.  For one, the South Texas crop is coming off now and by all reports is a very good crop.  In addition, there have been reports of several fields in Georgia being defoliated and even a few fields being picked.  We have several customers here that will be picking some cotton within two weeks.  I just do not see this crop being very late at all.  However, if the December continues to gain on the March, those holding some attractive December basis contracts will probably want to go ahead and price those bales, which would make merchants smile as well.  While things could "feel" tight in October and early November, I think by First Notice Day for the December contract which falls in mid November, there will be plenty of cotton for those that demand it by taking a long position into that period.  What does this mean for growers?  In my opinion, any rally we get will likely be one like the one we saw last week that took prices near .6800 and it will be led by the December contract.  If I were a grower, I would be pricing my cotton AS SOON AS I KNEW WHAT I HAD.  With the slight inversion, there is simply no reason at all to roll basis to March or hold cotton until March becomes the lead contract.  As always, we can help you buy calls if you are convinced the market will move higher after you sell your cotton.  As for me, there is no way I would own a bale of cotton after November 15th that had already been picked, ginned, and classed.

We will be mailing out notices and making calls to customers and potential customers later this week and next, but for those that read this correspondence, make a note that we will have our annual Pre-Harvest dinner next Thursday evening at the Dawson Country Club, beginning at 6:30 pm.  For those interested, we will first meet here at the gin between 5:30 and 6:00 to let growers and interested parties see the additions and improvements we have made to our facility in the off season.  We believe that it is now the most modern and efficient ginning facility around.  Again, we will be in touch, but hope to see a large turnout next Thursday as it should fall between your corn and fall crop harvests.  
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