Ag Market Update - October 28, 2015

Ag Market Update - October 28, 2015

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 15 Cotton .6290 .6220 .6267 + .0033 - .0175

Dec 16 Cotton .6305 .6275 .6296 + .0014 - .0282

Dec 17 Cotton .6353 + .0013

Dec 15 Corn 3.8075 3.7575 3.7675 - .0325 - .4425

Sep 16 Corn 3.9875 3.9500 3.9650 - .0250 - .3150

Nov 15 Soy 8.9100 8.8100 8.8100 - .1025 - 1.2450

Nov 16 Soy 8.9225 8.8575 8.8675 - .0500 - 1.0525

July 16 Wheat 5.2025 5.1225 5.1950 - .0100 - .7750

Cotton LDP Payment - 3.63 cents (estimated 4.91 next week)

Today's Market Report

It has been a pretty quiet day in the markets on a typical "No News Wednesday, with agricultural markets mostly lower with the exception of cotton, while larger markets and the Washington DC landscape dominate the news. Cotton prices continue to trade aimlessly after last week's big drop, and December settled fractionally higher today at .6267, up 33 points, right in the soft spot of the recent tight range. Grain crops were lower today, led by soybeans, which were off anywhere from a nickel to a dime per bushel. Corn was down by 2-4 cents, while wheat was off by a penny or so. Quiet export demand and benign weather conditions were cited as reasons for the lower grains, along with a resurgent US dollar. On the macroeconomic front, the stock markets, crude oil, and the aforementioned dollar were all significantly higher today. The Federal Reserve put out the same song and dance that we here every month today with the Federal Funds rate holding steady at zero to .25 basis points with the caveat that they "may" examine raising rates next month. I remain firmly in the camp that says we will not see higher rates any time soon, probably at least through the next election cycle next year. Our rates get higher simply by subtraction as other countries around the world continue to cut rates or artificially inflate the money supply. I would assume that is one reason why the dollar continued to strengthen today. We have also seen the Republicans seem to finally agree on Paul Ryan as their next choice as Speaker of the House despite a contentious debate within their own party. Along those lines, it looks like a budget deal is also imminent that will raise the Debt Limit well into 2017, putting that debate out of the question for next year's Presidential election cycle and seemingly giving the Democrats a victory on that front. I'm not sure what is so hard about simply spending what you take in, but apparently that idea is Greek to those in control in Washington. The one thing in this budget negotiation that stands out to those of us in agriculture is the $80 billion dollar increase in spending across the board and the idea that they will finance that increase with a $3 billion dollar cut in the Federal Crop Insurance program. Oh yeah, they are going to cut into Social Security disability benefits but like most other cuts, those will come years down the line. How anybody can have any faith in the Federal Government is simply beyond me. Most agricultural groups are hard at work trying to get the Senators/Congressmen to re-examine their ideas regarding crop insurance considering Agriculture successfully cut the $23 billion in funding that they were asked to in the last Farm Bill.

Inside the Cotton Market

Not a whole lot to discuss in this space today as prices continue to move aimlessly between .6200 and .6300. The balance of the week stands to be just as uninteresting as most market participants are either already in or traveling to San Francisco for the annual ICA meeting. We will get exports in the morning and it wouldn't appear that the news will be a market mover in either direction. With the market moving lower late last week, we are expecting to see a rise in the LDP rate starting on Friday, so we shouldn't have any producer selling pressure tomorrow and Friday as I wouldn't expect many loans to be redeemed/LDPs collected, which could lend to some moderate price strength, I guess. One topic I will touch on is the fact that with all of this adverse weather, those of you with high grades are once again in the proverbial catbird's seat. I've tried to dispel this El Nino phenomenon in my mind long enough, but I'm starting to see enough of this frustrating weather to know that it is going to be a long, trying harvesting season and that the forecasters are probably going to be correct. This will not necessarily put the number of bales that we produce in the US at jeopardy, but we are going to see a further degradation in quality I am afraid. With merchants already having some high grade cotton forward contracted, they are starting to somewhat scramble for those bales. If you do have high grades, it is a seller's market, at least until those forward sales are met. But for now, we will probably just trade in an aimless manner between .6100 and .6400 until the next crop report next month as harvest simply isn't going fast enough for market participants to know exactly what is out there. As for market planning, we are simply back in a "do-nothing" pattern. Look for weeks when we get a locked in, attractive LDP and subsequent market rally to sell bales. I can't see a situation where simply holding onto bales and hoping that prices will rise can be beneficial in any way, whatsoever.