Daily Market Update - November 4, 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            .6434               .6274                .6280               - .0145           - .1563

Mar 15 Cotton           .6330               .6194                .6197               - .0130           - .1699

Dec 15 Cotton            .6654               .6572                .6575               - .0106           - .1306

Dec 16 Cotton                                                               .6768               - .0106 

Dec 14 Corn                3.7250            3.6400              3.6450             - .0900           - .8575

Sept 15 Corn               4.0600            3.9875              3.9875             - .0800           - .6425

Nov 14 Soy                 10.2900          10.0500            10.1000           - .1875           - 1.2500

Nov 15 Soy                 10.1400           9.9325               9.9825            - .1600           -1.2850

July 15 Wheat             5.6250            5.5375               5.5475            - .0850           - .9050

 

 

Cotton LDP payment (through Thursday) -    2.43 cents/lb. 

Cotton Harvest Price Option Insurance Price - .6400    (official as of last Friday)

 
Tuesday's Market Report
 On Election Day 2014, the agricultural markets have elected to move lower as the reality of large harvests seem to finally be back on the minds of traders after a counter-trend rally in October for the grains.  After the soybean meal market finally gave up the rope last Thursday, we have seen soybeans, and subsequently corn and wheat start to slowly but surely fall under its own weight.  Today, cotton prices joined in the decline.  December cotton, which is quickly becoming 2nd fiddle to the March contract, lost 145 points today and closed at .6280.  March cotton, which could possibly take the open interest lead tomorrow and the contract in which all merchants are now bidding for cotton on lost 130 points and settled at .6197.  Even December 2015 cotton lost 106 points on the day, finishing at .6575.  Soybean prices dropped 18-20 cents on the day and November beans are now 43 cents off last week's highs.  If speculative buying doesn't show up soon, we could see a real collapse in the soybean complex really quick in my opinion.  With next year's soy prices still in the $10.00 range, I hope producers are taking advantage of this opportunity.  Corn and wheat were really just tagging along with soybeans and if soybeans do fall back, you can expect the same from them.  The other big news today was out of Saudi Arabia and its decision to cut its price of crude oil to the United States, which sent energy prices tumbling.  Crude oil traded below $76.00 per barrel, before moving slightly back above there late in the session.
Inside the Cotton Market
Volume was heavy once again today, but for a change, the sellers outnumbered the buyers and prices returned to the heart of the six week range.  The market started to give up last Thursday and looked to be headed south on Friday of last week and then again yesterday, but late buying showed up each day to thwart the decline.  Unfortunately for the bulls, that buying didn't show up today.  It simply appears that the harvest here in the United States is expanding at such a rapid rate that any threat of a December squeeze, the last real hope of a market rally, is very quickly evaporating.  After the market was unable to move beyond .6600 on this last attempt higher as the speculator piled back into the long side of cotton for some unxeplainable reason, with today's close we are only 197 from the .6083 low we posted back in late September.  If these specs run for the hills as quickly as they jumped in, it would stand to reason that we would challenge that low in fairly short order.  There are letter writers out there clamoring that the lows are in and we should be moving higher as the calendar turns to 2015.  I'm sure these folks are much brighter than me, but I just don't see it.  This crop here is in the United States is going to get bigger.  The world crop is going to get bigger.  China is supposedly committed to using more of her reserve cotton.  China's futures market in not reflecting the idea that prices are about to rebound.  The only way we solve the problem of burdensome stocks is to PLANT LESS COTTON.  Taking prices back to 70 or 75 or 80 cents doesn't solve the problem as much as you or I want it to.  We very well may just trade the boring 60-65 range for the foreseeable future, but I'm still going with my gut from two months ago and saying that we will ultimately see things get worse before they get better and that means lower prices.
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