Category: Cotton

10 Dec 2021

AG MARKET UPDATE: DECEMBER 9

This week, corn had a good rally following a couple of big down days last week. The December USDA report was released on Thursday with minimal changes and differences between the numbers and pre-report estimates. World stocks were slightly higher than pre-report estimates  at 305.45 million metric tons (304.47 MMT estimate) and marginally higher US stocks. The USDA did not make any adjustments to the South American crop estimates as they remain patient; we should expect next month to see a change. Continue to keep an eye on SA weather as any continued problems could play out in the market heading into the holidays.

CHART1

Via Barchart

Soybeans, like corn, saw a modest bounce following a couple of bad days last week. The expectation of a bearish report proved incorrect as the USDA left the stock numbers unchanged. The exports seem to have been slowing down and remain well short of the Phase 1 deal with China, so we could expect to see the export numbers lowered and ending stocks raised if there is no strong buying into the end of the year. All in all, the report lacked any market-moving fireworks.

CHART2

Via Barchart

 

Dow Jones

The Dow had a strong week bouncing back from its dip as there were plenty of buyers buying the dip. As fear of the Omicron variant relaxes and positive news on the vaccine fighting this strain, this cycle of the variant worry may have already hit and bounced back in the market. Many analystsare calling for a rally into the end of the year with many firms releasing their top picks for 2022. The CPI numbers will be released at the end of the week and will play out in the market on Friday.

Wheat

Wheat prices have been falling the last week and continued falling after the report. Australia and Canada had larger production than expected. Another important development specific to wheat will be the tensions between Ukraine and Russia, as any escalation would cause problems for wheat exports from Ukraine.

Podcast

For the past year, commodity prices have perpetually soared and continue to trend higher. We’re diving into the fertilizer forecast with a unique guest, Billy Dale Strader, a branch manager for Helena Agri-Enterprises in Russellville, KY., who is truly at the epicenter of the rising fertilizer prices.

Billy Dale planted his agriculture roots on his family-owned farm and has managed regional seed and chemical sales at Helena for the past decade. In this week’s pod, we tackle the big question for farmers and ultimately end-users — is the impact of higher-priced inputs, like seeds, chemicals, and fertilizer, on the supply and demand for the major U.S. crops? Listen or watch to find out!

PRICES-120921

 

Via Barchart.com

19 Nov 2021

AG MARKET UPDATE: NOVEMBER 9 – 18

Corn has seen a good bounce since the Nov 9 USDA report and has traded relatively flat the past few days despite some intraday volatility. There was no specific market-moving news to  fuel this rally but tidbits here and there to help fuel  overall positive  sentiment. IHS Markit updated their acreage for 2022 planted acres estimate with corn coming in at 90.8 million acres, 2.5 million lower than 2020. Ethanol production stays hot as the weekly grind rose to 312 mbu, up 7 from the previous week and well ahead of the USDA estimate for the year. With increased input costs going into 2022, the decrease in acreage makes sense, as balance sheets will be tighter. As harvest nears the end, eyes turn to South American growing conditions for the months ahead.

Via Barchart

Soybeans, like corn, have seen a solid rally since the USDA report. Soybeans continued their rally on Thursday until the EPA announced they would release their renewable fuel mandates by the end of the week. As the Biden administration has not been much of an ally for the ag sector, the decline on the coming news makes sense. Soybeans had decent exports this week as buyers keep showing up in the market even as prices trek higher. Continued demand from exports will help support beans, and it will be interesting to see how many beans get stored and who took advantage of higher prices with forward pricing. We will see this play out in the cash & basis market come the spring, but we expect most farmers to store corn for now. IHS Markit estimated  the 2022 bean acreage to be 87.9 million acres, 700,000 acres less than 2020.

Via Barchart

Dow Jones

The Dow struggled this week as earnings continue to come in, but market volatility seems to be expected with the holiday season coming up. The Fed can still raise rates this year, and the Biden administration has not yet announced their nominee to head the Fed (either keeping Powell or someone new).

Cotton

Cotton has had life in the $1.10+ range for a while now as demand overseas is high for U.S. cotton. Growers have seen mixed yields across the country but nothing too surprising to the market. Cotton demand does not seem to be slowing down anytime soon as the world still is coming out of the pandemic, and some countries still have major restrictions.

Podcast

For the past year, commodity prices have perpetually soared and continue to trend higher. We’re diving into the fertilizer forecast with a unique guest, Billy Dale Strader, a branch manager for Helena Agri-Enterprises in Russellville, KY., who is truly at the epicenter of the rising fertilizer prices.

Billy Dale planted his agriculture roots on his family-owned farm and has managed regional seed and chemical sales at Helena for the past decade. In this week’s pod, we tackle the big question for farmers and ultimately end-users — is the impact of higher-priced inputs, like seeds, chemicals, and fertilizer, on the supply and demand for the major U.S. crops? Listen or watch to find out!

 

U.S. Drought Monitor

The maps below show the U.S. drought monitor and the comparison to it from a week ago. The outlined areas in black are areas that the drought will have a dominant impact.

 

Via Barchart.com

27 Oct 2021

Cracking The Cotton Commodities Code With Ron Lawson

The Hedged Edge is back, and we’re jumping into the thick of the commodity markets with RCM’s own King of Cotton – Ron Lawson. Cotton prices have exploded since the COVID crash, rising more than 236% from the March 2020 lows. While prices have backed off from the October 8th high, cotton is one of the purest supply + demand-driven markets around the world and has caught fire along with the global inflation bug currently running rampant across many commodity markets.

Will it be hedge fund influence in cotton that costs consumers more this Holiday season or will the continued logistical issues tie up cotton at ports send consumers scrambling to eBay for their “snuggies”? For cotton producers, merchants, spinning mills, and banks financing the backbone of the cotton supply, risk management must remain at the top of mind for the remainder of this year and into 2022 (as the current cycle is likely to continue to last for at least the next 12-18 months.) We’ll dive into the thick of it in this episode and more — Hold on to your hats and enjoy!

Follow CME Group on Twitter @CMEGroup  learn more about Agriculture Options and the new CVOL Index on their website here https://www.cmegroup.com/agoptions and here https://www.cmegroup.com/cvol. And last but not least, don’t forget to subscribe to The Hedged Edge on your preferred platform, and follow us on Twitter @ag_rcm, LinkedIn, and Facebook.

01 Oct 2021

AG MARKET UPDATE: SEPTEMBER 23 – 30

Corn took it on the chin upon the release of Thursday’s USDA report before bouncing back to finish only slightly lower on the day, but still up on the week. The report may have left more questions than answers hanging around as they raised ending stocks, but as we mentioned last week, the current basis and cash markets hint there may be less corn out there than the USDA believes. Corn stocks came in at 1.236 billion bushels, which was higher than the average estimate going in. Harvest was 18% done at the start of the week, and further progress will have been made with favorable harvest conditions. Exports this week were not great for corn, while beans were strong. The next major report for corn will be the October 12th yield update. With harvest getting off to a fast start, it will be interesting to see if the private estimates and USDA are closer to each other than usual this far in.

Via Barchart                         

Soybeans fell post report as estimates were well lower than the USDA number of 256 million bushels. The average estimate was 174 million bushels which caused the immediate and lasting drop following the report. Obviously, nobody saw this number coming as it was well higher than the highest estimates. It is now time for the market to decide if they believe that number leading up to the October 12th yield report. Beans had great exports this week, but that was not enough to fend off the bears with the report. All the losses for beans on the week came from the report, as it had been pretty flat until Thursday. Soybeans harvested at 16% and will continue like corn this week. Like corn, the October 12th yield update will be critical as harvest has progressed further and we have a better idea of the crop.

Via Barchart

Cotton has been on a great run the last two weeks as you can see in the chart below. Cotton busted through several technical indicators in the 97 cent range while also clearing the 99.47 high from January of 2012. China has started to inquire about purchasing cotton as many companies look to import cotton and no longer use cotton from Xinjiang. Ultimately this is a supply/demand driven rally from strong global demand and uncertainty about the crop until it is out of the ground. Forecasts for rains in West Texas this weekend are not helpful for the crop and could cause issues depending on how much it does rain. Even with further upside potential to the cotton price this is a good opportunity to set floors to take advantage of this run up. As always look at your production and make the informed decision that applies specifically to your operation and not a cookie cutter plan.

Note: Since the writing above, Cotton has now topped 105 with December 2021 Cotton touching 107.28 on what seems to be a made rush of continued buying…. hold on to your hats!

Via Barchart

Wheat

Wheat saw a post-report rally as all wheat stocks came in at 1.780 billion bushels, which was below the pre-report estimates. Keep an eye on Russia as the export tax on Russian wheat will cut acres from their regular planting and could play out in the US wheat market as well.

Dow Jones

The Dow struggled again this week as September proved to be the worst month for stocks since March 2020, when Covid hit. Rising treasuries and interest rate hikes in the future had some to do with it, but September historically is not a great month for performance. One bad month in the span of a year and a half should not ring the alarm, but it will remind everyone that stocks can go down.

Podcast

Check out our recent podcast where we’ve brought on one of our real-life firefighters from RCM Ag – Jody Lawrence, along with Tim Andriesen from the CME Group to provide us with some inside baseball knowledge of the current state of agriculture markets. They discuss the real-world application of short-dated options to potentially fight the recent blaze of volatility surrounding agriculture markets.

https://rcmagservices.com/the-hedged-edge/

US Drought Monitor

The maps below show the US drought monitor and the comparison to it from a week ago. The outlined areas in black are areas that the drought will have a dominant impact.

Via Barchart.com

 

 

28 Sep 2021

2021 Harvest Report — Your First-Hand Look Into Tennessee’s and Mississippi’s Crop Season

As corn, soybeans, and many other crops begin to enter their harvest season, it is time to think about how the harvest is progressing on the farm. According to agriculture.com, soybean harvest progress is at 16%, and the site reported corn to be at 18%. On top of the progress, it showed that most western and northern states were at a pace above average, and southeastern states were progressing below average.

Last week, RCM Ag Services was fortunate to have a first-hand look at a couple of states within this region. Bert Farrish, Director of Commercial Agriculture, ventured out on an 800-mile crop tour throughout Tennessee and the northern Mississippi Delta from September 21-26. Let’s take a look at his 5-day journey across the south and dive into the industry as Farrish provides his very own commentary for a 2021 crop progress assessment.

Is Weather Hindering Western Tennessee?

The tour began in Western Tennessee, where turbulent weather was predicted in the forecast, and it wasn’t long before Bert was met with strong thunderstorms between Nashville and Lexington. As he encountered severe weather along the I-40 corridor, he naturally observed little to no harvest work. “The crops looked relatively good; however, Western Tennessee has a long way to go with this year’s harvest,” Farrish stated.

“There is still a lot of corn and soybean in the field, and I predict that harvest, for both corn and beans, will move well into October.” But it wasn’t just corn and beans that needed additional time this year. “Cotton wasn’t near ready for harvest; I am estimating that the harvest won’t begin until mid-October.”

Driving Into The Delta

As Farrish continued his driving tour into the Mississippi Delta, progress wasn’t much further along, and he stated that this area had also received recent rain showers. “I would say corn was 90% complete in the areas I drove through,” which contained routes along I-69, Hwy 61, Hwy 8, and Hwy 6.

“With some exceptions, most crops looked great!” However, Farrish had stated some crops like rice still had a ways to go. “I would say the crop is later than usual, but they will wrap up the bean harvest in the next few weeks with good weather.”

But as we all know, weather this time of year is unpredictable, especially with rain in the forecast this week at a 60% coverage. Over the weekend, there was a steady line of trucks through Cleveland headed to the port of Rosedale, MS. Combines were running everywhere Saturday, September 25, and Sunday, September 26.

The Bolls Are Open — A Preview of the Cotton Counties

With the driving tour coming to an end, the last assessment concludes with cotton. Harvest for cotton still has a long way to go. Farrish predicts that 30-50% of bolls are open. “There were minimal small fields that were ready to pick, but certainly no one is going to open a gin for a few bales.”

But that doesn’t mean all areas in the Delta need work. The cotton in Coahoma and Quitman counties looks as good as ever. Farrish stated, “Some fieldwork has been done in the north Delta, but I am certain harvest for all crops is further along in the south Delta, meaning Hwy 82 and south to near Vicksburg. But I was unable to see this area in this trip.”

Final Trip Takeaways

Overall, Bert concluded his trip feeling optimistic about the crop prospects. Although some areas need improvement, most crops look strong and are on track to have a strong harvest season.

Visit our blog, Here’s What you Need to Know About the Outlook for the First Week of October, for an additional harvest update on the many unknown/under-reported issues early in the year that we may be seeing played out combined with the dry and hot finish.

27 Jul 2021

Managing Today’s Market Risks through Short Dated Options with CME Group

It is no secret that commodity markets have been on fire over the past 12 months.   On today’s podcast we’ve brought on one of our real-life firefighters from RCM Ag – Jody Lawrence along with Tim Andriesen from the CME Group to provide us with some inside baseball knowledge of the current state of the agriculture markets and to discuss the real world application of the use of short dated options to potentially fight the current blaze of volatility surrounding agriculture markets.

As the director of Research for RCM Jody is no stranger to the podcast.  Tim, is the Managing Director of Agriculture products for the CME Group and is responsible for management of the company’s global agriculture commodities business – including grain, oilseed, livestock and dairy risk management products.

 

Find the full episode links for The Hedged Edge below:

11 Jun 2021

AG MARKET UPDATE: JUNE 4-11

Corn had another good week that was made better following the bullish news in Thursday’s WASDE report. At the start of the week corn planting was seen as 91% complete with little progress being made from last week but at this point in the process limited progress is expected. The dryness in the Midwest and other areas of the corn belt can be seen in the drought monitor below. The USDA agreed with what many in the industry have been saying by reducing US and world ending stocks.

20/21 US ending stocks was adjusted down to 1.107 billion bushels from 1.257 in the May report while 21/22 ending stocks were adjusted down to 1.357 billion bushels from 1.507 in May. World ending stocks for 20/21 were lowered to 280.60 million tonnes from 283.53 while the 21/22 was also lowered to 289.41 million tonnes from 292.30. There is still a disconnect between the USDA and the public on what’s going on in South America and the size of their crop. Word on the street is that it has been shrinking as weather woes caused issues but the USDA does not have them down nearly as much in this report.

Now that growing season has started weather and specifically where it does and does not rain will be the main price driving factors.  The upper Midwest is dry but the delta just got torrential rains this week and areas in Indiana and Ohio have been soaked too. The rain in the Dakotas and Iowa to end the week will help but still need rain over extended periods to get back to good growing conditions.

Via Barchart

Soybeans slipped a bit on the week but are still hanging on inside the recent range. Bean news has been quiet as of late with no market specific news, unlike corn. Soybean planting was seen as 80% complete to start the week with some continued progress to be made. The USDA WASDE report was more bearish for beans than corn but markets responded well after.

The 20/21 US ending stocks were raised from 120 million bushels to 135 million and the 21/22 ending stocks were raised form 140 million to 155 million bushels respectively. These were both still within trade estimates so no major shock with the US or the world stocks. The 20/21 world ending stocks were raised from 86.55 million tonnes to 88 million and the 21/22 ending stocks were raised from 91.10 million to 92.55. Raising the stocks month over month is usually bearish and old crop took a hit while new crop rallied on the report.

Markets moved lower Friday with rain coming in some much needed areas heading into the weekend.

Via Barchart

Cotton has seen modest gains this week after soaking rains and flooding in areas of the Delta. The WASDE report this week showed the expected directionally bullish revisions. There were no major surprises, but their numbers may be hinting at a continued decline in production going up against the rising levels of global consumption. The USDA projections for 21/22 show a 100,000 bale increase in exports from last month to 14.8 million bales. As exports continue to be strong for the 20/21 crop ending stocks were lowered 200,000 bales to 2.9 million ending stocks. Global ending stocks were lower as well with consumption rising.

Via Barchart

Dow Jones

The Dow lost slightly on the week as news was slow with no major market news or movers. Covid openings continue as numbers continue to decline in the US while there are still problems around the world.

Lumber

Lumber prices have dipped recently but are still at very high levels historically. Check out our recent post about the lumber market and what all has been going on.

Podcast

Check out our recent podcast with Dr. Greg Willoughby: We’re talking with Greg in the new episode about being a “plant doctor”, weather patterns, GMO & organic produce, crop history, technical advances, level 201 education on agronomy, the agronomy equation, Helena Agri, soil biology, American v European agriculture, Greg’s early background in livestock, and the advancement of native plants to modern produce.

https://rcmagservices.com/the-hedged-edge/

US Drought Monitor

The map below shows current drought conditions and the continued problems in the upper Midwest. More drought conditions have crept into southern Iowa and parts of Nebraska in the last week. Heat over the next two weeks will be a problem in the Dakotas and western corn belt.

Via Barchart

 

07 May 2021

AG MARKET UPDATE: MAY 1-7


Corn continued it’s hot run this month with a great week in both old crop and new crop prices. As Brazil’s safrinha crop keeps facing a dry outlook, pressure is mounting on the US to produce a great crop to fulfill world demand. The US forecast is turning wetter for many major growing areas but remains cool for this time of year. The cool weather is not ideal for early growth, but the rain will be welcome in areas facing drought conditions (see map at bottom). There is a rumor of more Chinese interest in new crop which helped propel old crop to end the week. Despite poor exports this week, this news, along with South America’s troubles, have been the market moving news this week. The US corn crop is seen at 44% planted at the start of the week beginning May 3.

Via Barchart

 


Soybeans followed Corn this week as they also saw strong gains. China’s ASF news has slowed as of late which is good for export expectations to China. The world demand has continued to be strong and helpful to prices in both South America and the US, while US beans remain competitive in the world market even at these levels. The recent wet and colder weather across much of the US is not expected to cause any issues for the soybean crop except maybe pushing planting back in some areas where farmers also must wait to plant corn. 25% of the US soybean crop is seen as being planted for the week beginning May 3.

Via Barchart

 


The big question right now: What is going on with cotton? Cotton has not enjoyed in the rally in 2021 that other commodities have. The demand has been there, but there are already worries about the 2021 cotton crop. Normally these are a recipe for higher prices, right? The fundamentals would agree as higher comparative prices for other commodities may take away some cotton acres by the end of planting season. The technical side has been cotton’s enemy as of late as they have not been able to make new contract highs, unlike the grains. The world shipping bottleneck does not appear to be getting any better and as the US continues to come out of lockdowns along with other countries demand will only make it worse. This problem needs to be solved sooner rather than later.

Via Barchart

 


Dow Jones
The Dow was up this week while other indexes were mixed with the Nasdaq and Russel falling. As earnings continue to be reported many of the winners of the last year have posted strong quarters but it appears the momentum behind them have slowed as good earnings have sometimes been followed by selling.

Lumber
Check out our recent post about the lumber market and what all has been going on.

Podcast
Check out or recent podcasts with guests Elaine Kub and Kyle Little. Elaine and Jeff discuss grain markets and trading grains while Kyle helps give insight into the Lumber markets and what has been going on.

Listen with Kyle:

Listen now with Elaine

CME
CME Group announced this week that it will not re-open its trading pits that were closed last March at the start of the pandemic. The Eurodollar Options pit will remain open. See the full press release here.

US Drought Monitor
The map below shows the current drought conditions throughout the US as planting continues across the country.

 

Weekly Prices

Via Barchart.com

 

 

30 Apr 2021

AG Market Update: April 24-30

Volatility was the name of the game this week as many days saw wide trading ranges on both sides of unchanged. Looking at the chart below you can just how wide ranges the last few days have been.  Despite the volatlity, the May contract settled squarely within the range as of Thursday.  This volatility came about as we’ve faced a short squeeze on the front month May contract.  Coming into the week, there were nearly 200,000 open contracts, as of this morning there are only 12,500 – presumably many were on the short side and needed to cover.

Regardless of what has caused the rally – higher prices is GREAT for the American Farmer!

For the July contract and new crop Dec, the markets followed the May higher this week and most April as South America’s struggles with drought conditions begin to be seen in yield estimates.  Any rain after May 10th probably won’t be able to add must help this late in the game. As expected, exports were good this week but that has become the new normal. The epanded limits coming next week along with higher prices means we should probably expect volatility to hang around.

Via Barchart

Soybeans had small gains on the week as they also traded in wide ranges in the May contract in addition to future months. The short squeeze has end users scrambling with physical delivery coming up. Along with beans rallying, we have seen basis improve in many areas as buyers try get what is left out of farmers bins. A growing consensus among traders is that continued strong US cash bids indicate that the stock numbers are lower than the USDA reports.  Will the USDA adjust in the June report is a major question?  Bean meal and oil have also rallied in the past couple weeks aiding to soybeans rise. The fundamental news around the market was less in focus this week with the May contract expiration causing for most of the volatility.

Via Barchart

Dow Jones

The Dow was up slightly on the week as more news about reopenings continue to roll in and President Biden gave his first speech to Congress. Vaccination rates continue to be strong in many cities and New York City announced this week they will lift all restrictions for reopening July 1st.

Lumber

Check out our recent post about the lumber market and what all has been going on.

Podcast

Check out or recent podcasts with guests Elaine Kub and Kyle Little. Elaine and Jeff discuss grain markets and trading grains while Kyle helps give insight into the Lumber markets and what has been going on.

https://rcmagservices.com/the-hedged-edge/

 

Other News

On Monday, daily trading limits will expand for our major markets with corn increased from 25 cents to 40 cents, beans from 70 to $1.00 and wheat from 40 to 45.  The CBOT is not tipping their hand that they expect volatility this summer, the daily limit increases are largely due to the high prices to keep daily ranges in line with historic percentages of price.

 

US Drought Monitor

The map below shows what areas are currently experiencing drought conditions across the US. Not much changed from last week. The rains in Texas will help alleviate some dryness in the area but will not solve their moisture issues. Some dryness has crept into Illinois and Indiana but nothing to worry about right now.

 

Weekly prices

Via Barchart.com

23 Apr 2021

Ag Markets Update: April 17 – 23

Off to the races? Corn was limit up Thursday as prices for May corn topped $6.50 for the first time since 2013 continuing its impressive weekly run. The May option expiration occurring Friday has traders scrambling to cover short call option positions by buying futures and positioning themselves for next week’s first notice day. As we have been seeing in the cash market for a while with improving basis, it seems the futures market is catching up and realizing the market needs corn and it needs it now. Any farmers with old crop remaining has the cards in their hands looking to get prices high enough for them to make any sales. The cold weather/snow across much of the country this week is not expected to cause many issues except delaying planting a little longer in some areas as we wait for soil temperatures to get back up. Brazil’s dry outlook has not changed and will continue to put stress on a crop that does not need anymore problems. Continue to monitor the dryness in South America as problems there will transition to gains in our new crop markets as the world will need the US to produce a large crop.

Via Barchart

 

Soybeans gained on the week as they followed corn for similar reasons. The South American weather issues will not effect the soybean market like corn but as we have seen good news for one has been good news for the other. The may option expiration came into play as beans saw a strong rise on Thursday even though they were not limit up. Exports this week were nothing to write home about but still within expectations and well ahead of the pace needed to meet USDA estimates. With world demand high, the US needs to have a great crop to meet it and not cause issues in the world pipeline. As volume begins to pick up in the November contract it will be important to have a plan for marketing your crop this year as volatility is always around.

Via Barchart

 

Cotton did not enjoy the rally the grains had this week as they continue to trail the other markets in price competitiveness. Weekly exports are expected to decline going forward, not from a lack of demand, but from a lack of supply left in the US, which should be seen as bullish despite lower export numbers appearing bearish. The big head scratcher is why cotton prices are lagging the grain market so much when prices need to be competitive just to get all the acres in the ground. With corn and soybeans taking their next leg up this week, December cotton equivalent price should be about $1.11 vs. the current $.84. What is needed to get to this level? We could see what is currently playing out in the grain markets on option expiration causing a big boost when the next one comes up, but cotton needs a boost to get it all in the ground.

Via Barchart

 

Dow Jones

The Dow had been trading fairly evenly on the week with some down and up days until Thursday’s losses following the Biden administration stating their plans to increase the capital gains tax to over 40% for high earners. A number that high will face headwinds from the house and senate and is unlikely to come to fruition but the Biden administration did campaign on raising those and a raise should be expected.

Lumber

Check out our recent post about the lumber market and what all has been going on.

 

US Drought Monitor

The map below shows what areas are currently experiencing drought conditions across the US. Not much changed from last week.

 

Weekly Prices

Via Barchart.com