Ag Market Update - March 12, 2015

Ag Market Update - March 12, 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

May 15 Cotton .6158 .6026 .6122 + .0089 + .0015

Dec 15 Cotton .6330 .6237 .6323 + .0084 - .0119

Dec 16 Cotton .6299 + .0044 - .0279

Dec 17 Cotton .6460 + .0044

Sep 15 Corn 4.0625 4.0125 4.0300 - .0275 - .1975

Nov 15 Soy 9.7550 9.6450 9.6750 - .0400 - .3800

July 15 Wheat 5.1575 5.0000 5.0950 + .0775 - .8800

Cotton LDP - 4.95 cents

Today's Market Report

Break out the bubbly !! Cotton FINALLY snapped a 10-session losing streak today with moderately impressive gains of 89 points in the May contract and 84 points in the December. Positive, if unimpressive, export sales were cited as the catalyst for the gain, although that might be stretching it, in my opinion. The dollar index, after trading above 1.000, finished the day lower for the first time in a while with all eyes suddenly looking at the greenback as the key for trading most anything these days. Grains were mixed on Thursday, with corn and soybeans lower and wheat higher. I can't remember the last time the two recent whipping dogs, cotton and wheat, both had such an impressive day. Positive exports were also mentioned as a reason for wheat's gains today, while less than positive numbers for corn and soybeans did no favors for those markets. In concert with the lower dollar, the stock markets were higher as you might expect. The Dow gained more than 250 points, while the S&P was higher by 25. One market that couldn't benefit from the lower dollar was once again, crude oil and the energy market as a whole. Crude was off by more than a dollar once again, and has shed more than $8.00 barrel from the recent high. Storage of crude, gasoline, and diesel here in the US is nearing capacity, while output continues at a rapid pace. This conundrum will likely be the catalyst for the next leg lower in energy prices.

Inside the Cotton Market

I suspect that exports might have had something to do with the cotton market being higher today, but instead of a report of last week's business, I think some probable overnight "new" business was the real reason behind the near triple-digit gains. The market was higher by 100 points overnight, which implies that some sizeable sales were probably made overseas while most of us slept. The sales figure of 35,000 bales was certainly more impressive than the recent string of cancellations, but the market did not initially react to this data at all. Shipments of cotton out of US warehouses continues to be at a brisk pace, totaling more than 300,000 bales for the 2nd straight week. All in all, I think the lower dollar, unconfirmed overnight export sales, and the general fact that cotton was terribly oversold can all take equal credit for the gains today. Many merchants that I have spoken with thought that the .6000 area would likely reinvigorate inquiry of US bales and today's action indicates as much. I don't think bulls can beat their chests and say the worst is over, but today's price action should, at the very least, buy some time in which the market trades sideways to slightly higher. If the May market can somehow take out and close back over the all important 40 and 100 day moving averages, we could be on to something bigger, I would guess. Unfortunately, I think the last ten days of lower prices, at least, lowered traders expectations of potential highs in the coming days and weeks. As for new crop prices, I think for those that like to zig when other folks zag, taking a sales position near .6500 might turn out to be a pretty good play down the line. A .6500 market combined with a potential 1000 - 1500 LDP with a decent crop and a continued bullish dollar might be the savviest marketing we do all season long.