Ag Market Update - January 29, 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

Mar 15 Cotton .5978 .5910 .5957 + .0013 - .0070

Dec 15 Cotton .6334 .6280 .6313 + .0014 - .0129

Dec 16 Cotton .6414 - .0004 - .0164

Dec 17 Cotton .6564 - .0004

Sep 15 Corn 3.9600 3.9100 3.9450 - .0125 - .2825

Nov 15 Soy 9.6400 9.5050 9.5125 - .0700 - .5425

July 15 Wheat 5.2225 5.1175 5.1700 + .0100 - .8050

Cotton LDP Payment - 7.01 (effective tomorrow)

Today's Market Report

Just a quick report today as markets were generally quiet, despite some really fundamentally good news on the cotton front. Cotton prices were fractionally higher today with March cotton up 13 ticks and December gaining 14 points. The closing prices can be seen above, but what is not shown above is the very impressive export sales number of 546,000 bales of US cotton from last week. It is very surprising that the market reacted so nonchalant to this news. For the last three weeks, we have now sold nearly 1.5 million bales of cotton and our export commitment now stands at 95% of the 10.0 million bale export estimate currently carried by the USDA with more than six months left in the marketing year. In our last correspondence, we thought this export report might be a good one and it exceeded our expectation. Unfortunately, the price response did not act accordingly. Why did we not move higher? In my opinion, with the US dollar continuing to move higher (which makes our exports even more impressive) speculators continue to sell anything and everything that is commodity specific. Case in point, we saw corn and soybeans continue to slide today, while wheat somehow scratched out a marginally higher close. Crude oil made another new low, cows and hogs continue to move low, as do other commodities such as rice. The stock market was able to move higher after yesterday's shellacking, largely on the back of another record performance by Apple. As I've said many times before, I'm the farthest thing from a stock picker. However, can anyone out there give me a reason not to short farm equipment stock such as John Deere or Caterpillar going into this year? Who in their right mind is out there looking to buy a new tractor in today's agricultural climate? Back to cotton, I still believe that we will see spot prices rise here in the near term. It is all but obvious that we will see a taker or multiple takers of the March cert stock when it is the cheapest place they can source US cotton and our ending stock estimate gets smaller every day. Again, long term I don't see how we have a sustained rally across the spectrum of contracts until we see some clarity out of China and India, along with a solid look at real planted acreage in the Northern Hemisphere. But for now, you have to be friendly toward cotton prices if you go specifically by the US balance sheet. I would urge everyone that has not taken their LDP payment to do so, starting tomorrow morning as I predict it will top out for the foreseeable future at just north of 7 cents. Use rallies to sell the remainder of your bales. It would stand to reason that the March market should rally back toward .6200 in my amateur opinion. Whatever effect a move would have on new crop prices would probably be negligible, but I certainly don't see December prices falling much lower, given the current US fundamental landscape.

Inside the Cotton Market

Really nothing to add in this space today, but I would like to let our cotton customers know that we have started working on ginning and seed rebates today. We should have these finished early next week and issuing checks by the end of next week. As always, we thank you for your patience with this and for your support in past years and hopefully, in future years. If you have any questions regarding these rebates, please feel free to give me a call at the office.