Daily Market Update - October 1, 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            .6233               .6115                .6216              + .0079            - .1627

Mar 15 Cotton           .6105               .6020                .6099              + .0054            - .1797

Dec 15 Cotton            .6400               .6347                .6401              + .0035            - .1480

Dec 16 Cotton                                                               .6779              + .0035

Dec 14 Corn                3.2350             3.1825              3.2125           + .0050            - 1.2900

Sep 15 Corn                3.5900             3.5425              3.5775           + .0100            - 1.0525

Nov 14 Soy                 9.1975              9.0400             9.1675            + .0350            - 2.1825

Nov 15 Soy                 9.4550             9.3000              9.4225            + .0475            - 1.8450

Jul 15 Wheat              5.1275             4.9975              5.0900            + .0450            - 1.3625
Wednesday's Market Report
Just a quick update on this Hump Day as cotton prices finally posted a positive close across the board for a welcomed change.  Once again, December was stronger than the back of the board and we expect that to continue as this crop lags somewhat despite what the USDA says regarding historical averages.  December gained 79 points and closed at .6216, while March settled at .6099, up 54, the spread obviously widening to 117 over.  Grains were higher today amid very quiet trading with corn up a penny, soybeans up four cents, and wheat up a nickel.  There was certainly no news to make us believe that we have put a low in any of these crops but some rough weather is supposed to make its way across the Midwest over the next several days that could delay harvest.  Most people were more interested in the macro picture today, which featured as we all now know the first case of confirmed Ebola Virus to reach the United States.  A patient in Dallas, after traveling to Liberia last month is said to be in critical condition and the far reaching effects of this situation simply are not known just yet.  With all the terrorism threats and other geopolitical anxiety around the world, it stands to reason that the Dow Jones and other equity markets fell flat on their proverbial faces today.  With stocks at the highest levels on records, we could see a precipitous drop in the short term in the face of all this current turmoil
Inside the Cotton Market
 Not much to report today on this "No News Wednesday" and probably wouldn't have filed a report had the market not actually printed a positive close but since they are so far and few between, I felt compelled to do so !  There isn't much fundamental news right now to report because a) most market participants are in Dubai for the ICA Annual Meeting, b) the crop is the earliest stages of harvest, and c) the market seems to have reached an interim equilibrium.  The biggest news of the day was probably a two-part deal, one being positive, one being negative.  First the positive, after a decade-long struggle, the US and Brazil finally seemingly buried the hatchet on Brazil's WTO case against the US and its "trade distorting" cotton policy.  It took $300 million in payments to the Brazil Cotton Institute but it is certainly a good thing to finally have this dark cloud finally in the rear view mirror.  The negative news came out of the ICA meeting in Dubai where Joe Nicosia, head of Louis Dreyfus Cotton indicated that he thought cotton prices needed to move even lower to remove the excess glut of cotton that we had built up globally over the past three seasons.  While this is the same line I have been toeing for months now, it is a tad different when the foremost voice on cotton in the world says it as opposed to me.  While he didn't give a price point that he believed cotton needed to go to to relieve this excess inventory, the Reuters story indicated that he thought it might be as much as a ten year process; lets certainly hope that is not the case.  Nevertheless, I do believe that December has the chance to strengthen somewhat in the short term, but not by a whole lot.  On any move back toward .6400 - .6500 in December, I would be pricing additional cotton to average with those bales I priced earlier in the season.  Reports out of the Mid-South indicate that if early yields in Mississippi, Louisiana, and Arkansas are any indication, state records could be in store for those locations.  But for today, the market was higher.  For that, we will be thankful.  Hopefully, we will get a decent export report tomorrow that will extend these gains and get us to a level were we can extend coverage and buy some long term puts at cheaper prices.
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