Tag: cotton markets

16 Oct 2020

AG MARKET UPDATE: OCTOBER 10 – 16

Corn has continued its momentum up following Friday’s USDA report despite a hit to prices to start the week. Corn closed above the $4.00 mark for the first time since January on the Dec’ 20 contract (see chart below). This year has been different for many reasons but having the highest prices of the year come during harvest definitely adds to it. The “harvest lows” look to have been in August with the run up of 80 cents/bu, giving farmers hope after depressed prices all spring and summer. The USDA report from Friday came in with a yield estimate of 178.4 BPA and lowered the 2020 harvested acres to 82.5 million acres when estimates had it at 83.321 million acres. US corn harvest came in at 41% complete this week with favorable weather over the next two weeks to keep it going. Chinese purchases continue to roll in as they continue buying after their holiday break. Brazil’s weather outlook has improved in the short run to get some moisture but after this rain the long term picture remains unclear as Argentina looks dry as well.


Via Barchart

 

Soybeans rallied this week after gains last week and after the USDA report. Markets came down Monday on funds taking profit but have slowly come back over the last 3 days. The factors moving the market have been the same for the past several weeks. The USDA report from Friday estimated yields to be 51.9 bu/acre and 290 million-bushel stocks, almost 80 million below estimates. Harvest is 61% complete and looks to be full steam ahead with the promising weather across the US. As more uncertainty has come up this week with as China’s Premier Xi criticized the US in a speech regarding the US’s relationship with Taiwan. As the election nears US and China’s relationship will be stressed. What this will do to the Phase 1 agreement is an unknown, but China continues to need our beans which is helpful in the long run.


Via Barchart

 

Cotton prices rallied this week as flooding in India caused damage across large growing areas and possibly damaged up to 1/3 of the country’s cotton crop. With India’s cotton crop damage and Pakistan’s ongoing crop issues look for mills to look to the US for their cotton needs. Looking to ’21, if soybean and corn prices stay strong into the spring there will be a sizeable amount of cotton acres that shift to corn or beans tightening the supplies. Many experts think that the prices will be allowing for future demand to help prices as well.

Via Barchart

Dow Jones
The Dow continues to bounce around as there have been 3 down days after 4 up days. Europe is struggling with a possible second outbreak and the US continues to struggle with Covid-19. Election news and Covid-19 news will be the main market movers as vaccine trials are starting to have issues.

World Weather
The International Research Institute put out a forecast for the next 3-months for South America with expectations of normal rain and temperatures for Brazil with drier conditions for the for southern Brazil and Argentina’s main growing areas.  US weather looks great into November for a quick sprint to the finish for harvest.  Russian forecasts remain dry into month end which is driving wheat prices.



Via Barchart.com

08 Oct 2020

AG MARKET UPDATE: OCTOBER 3 – 9

Corn followed beans higher this week as exports continued and Brazil’s weather is still questionable as their season starts. Corn harvest in the US is 26% complete as favorable weather looks to allow for harvest to continue across the country. As Chinese buying continued following holiday, markets are keeping an eye on their purchases as the Chinese government changed laws in what can be fed to hog herds as they continue to recover from ASF. By not allowing for swill (food waste and garbage) to be fed to hogs anymore the demand for corn and meal for feed looks to increase, but it is hard to tell how much swill feed will need to be replaced. Ethanol demand has remained lower than normal as the pandemic continues, but with lower demand has also lowered production. The lower production has lead to tightening in stocks to their lowest level in 8 years. If/when ethanol demand rebounds, look for a boost in corn purchases for ethanol use to replenish stocks and meet demand. Keep an eye on the USDA yield estimates on Friday.


Via Barchart

 


Soybeans kept the rally going this week on weather concerns in South America and exports continued in large amounts. South America remains in a dry pattern that could turn into a drought if they do not get the much needed and forecasted rain in the next couple of weeks to get the beans in the field in some major growing areas. Harvest continued across the US this week as harvest is seen 36% complete as favorable weather across much of the US has allowed farmers to get off to a great start. As China came back from holiday the buying continued as feed demand in China has started to pick up despite herd sizes only being about 65% of what they were before ASF. Fund buying has also continued this week as funds now are long 1.4 billion bushels (about 10% of the expected world production in 20/21) of beans. Prices will once again be paying attention to the USDA report on Friday but do not expect anything like the last report. As you go through harvest we suggest not storing any beans as the market is currently inverted (Nov prices being better than anything in ’21) showing the market wants your beans now. Not seeing a carry in the market makes it hard to hold the beans when selling the physical and getting long futures if you believe the markets are going higher is an option.

 

Via Barchart

 


Funds continued to get long wheat this week, with some profit taking on Thursday, helping fuel the rally that other grains have seen. Weather problems in other areas of the world are helping markets move as parts of Russia remain dry and the Black Sea area has been dry but is forecasted to get much needed rain this week. Argentina like Brazil has been dry but looks to continue their dry pattern unlike Brazil. Stocks are expected to be lower in the report on Friday from the September report.


Via Barchart

 


Cotton prices rallied this week as Hurricane Delta heads toward the Mississippi Delta. The fact that there is still plenty of time for another storm before harvest after Delta worries farmers that one storm may be fine but another would present major issues. Cotton has seen a steady rise in prices since the lows back in April. Exports were good this week as there were little cancellations and strong sales to Vietnam.


Via Barchart

 

Crude Oil
Crude saw a boost this week as Hurricane Delta has shut down production in many parts of the Gulf of Mexico. This is typical of prices whenever a hurricane is in the gulf as reactions to what may happen is usually worse than the outcome.

Dow Jones
The Dow continues its bounce back despite back and forth tweets from Trump and Pelosi regarding a new relief bill and what it should look like. Big tech stays in the news as Amazon and Facebook are continuously being looked at for anti-trust violations by a bipartisan group, not much is expected to come from this but worth noting.

World Weather
Brazil has been dry causing some delays in planting but some rain this week and cooler temperatures are in the forecast so markets will keep an eye on any changes there. Hurricane Delta barrels toward the US as farmers in the south look to try and get their crops out ahead of any rain that could cause damage, especially to cotton in the Delta.

 

Via Barchart.com

21 Aug 2020

Ag Markets Update: August 15 – 21

Corn stayed level on the week after last week’s rally from the storm damage. Pro Farmer Tour is on the road this week looking at several areas across the midwest. The markets will be keeping an eye on them as they try and assess the damage of the storm and how many bushels were lost as well as the potential yields in areas not affected by the storm. So far the PFT has shown better than expected yield potential for Ohio, Indiana, Nebraska and the Dakotas. The parts of Iowa and Illinois to miss the storm look strong as well but storm damage is ultimately what people are holding their breathe for. Parts of western Iowa that were not affected by the storm have had another problem of their own, a severe drought that is going to cost the area bushels as well. All eyes and ears will be on the PFT as they try and estimate how many acres/bushels were lost to the derecho; more than expected expect another small rally, less than expected we could see another retreat as we head into harvest season.

 

Soybeans saw a small boost this week as China continues to be a major buyer. PFT is also looking at beans and making estimates based off pod counts so that has been a market mover this week as well. Bean pod count numbers are running well ahead of last year and historical averages, which indicates the bean crop still has above trend line potential which is bearish at these levels after the recent 54-cent rally. Several areas are in need of rain as well in the next 10-14 day window that look relatively dry for most areas continuing the trend of the past couple of weeks. At this stage beans still have plenty of ways to go to get to harvest ready so keeping an eye on them as August comes to a close will be important as well as always keeping an eye on export numbers.

 

Cotton prices gained on the week as strong exports and the concern of the possibility of a tropical storm in the gulf grew. West Texas has already had many weather issues, but the south has had a good year so far for growing but a storm with strong winds could change that. China was the biggest buyer of cotton on this weeks export report with 13 total buyers. This is promising as it would appear that other countries demand is beginning to come back after a summer of shutdowns has kept exports low. The US dollar continues to struggle providing some support for US commodities on the world stage. Continue keeping an eye on China as more rains continue to affect the Yangtze River as it reached new record water levels this week. The US and PRC look to continue trade talks in the coming days so expect any news, positive or negative, to affect the market.

 

Via Barchart.com

10 Aug 2020

Ag Markets Update: August 1 – 7

Corn took it on the chin this week, again, as crop conditions and weather forecasts continue to point toward the potential of a record yield. With strong conditions and weather moving forward, most of the corn belt, with the exception of parts of Iowa suffering from severe drought, are running out of time for many weather factors to effect the crop. Keeping an eye on forecasts for Ohio and Michigan will be important to farmers as they could use some rain in those areas but are not desperate, yet. If the forecast continues to look promising there is not much bullish news out there to help find support with a 180 bpa crop still in play. Keep an eye on exports as we continue to see strong export numbers but little positive price reaction as a product of it. Yield estimates range from 178-183 bpa from what we have seen from across the spectrum, showing that many top experts believe a record yield could be seen this year.

Soybeans had a tough week like corn because high yields are still very much in play on top of already strong stocks. Without China ramping up their purchases to try and at least act like they are trying to reach the Phase 1 Trade Agreement; beans are running into a demand problem. Bean yields are looking to potentially be 52+ bpa with a 73% G/E rating this week saw prices take a hit. Beans and corn have been moving lower over the last few weeks as few weather issues and no large surprises in demand have come to fruition. Any problem that China has with the Three Gorges Dam area could lead to more purchases but a total failure of the dam would be a disaster as it could cause a massive loss of life along with flooding of large areas of farmland.

Cotton has seen a boost this week as it, like other raw materials have seen a boost as demand around the world starts to come back. Another supportive factor for cotton has been the continued decline in the value of the US Dollar. The threat of Hurricane Isaias effecting the crop in the SE helped give a boost early in the week but how much damage it actually did to the crop remains to be seen. If prices can breach and stay above 65 cents that would be a good level of support.

Phase 1 Trade Agreement Meeting
The US and China are set to have their first check-in meeting to assess how Phase 1 is going (spoiler alert: not great). This is on top of recent tensions over the closing of embassies and spying allegations. Not sure that anything good can actually come out of these talks but they will be worth keeping an eye on August 15th. Hopefully we see a commitment to ramp up and get a boost to start that week following.

Lumber
Lumber continues its upward trend to price levels we have not seen since 2018. Lumber is a commodity the is easily produced because of the sheer quantity of it available supply is not an issue to slow down consumption. As many purchases and contracts are done well in advance the demand has not wavered as much as the pipeline of getting it from A-Z has. In a volatile market like this, especially during this kind of positive run for price, nobody ever wants to call the top so looks like everyone may want to ride it out and see what happens.

31 Jul 2020

Ag Markets Update: July 25 – 31

As weather across the country continues to be supportive for the crops corn prices have dropped. The past few weeks of timely rain and cooler temperatures has put a trend line or record national yield very much in view. From talking to farmers across the country many think this has potential to be one of their best crops and as great as that is everyone knows the larger the yields the lower the prices tend to be. With China well behind on their phase 1 trade agreement purchases, corn will need to get support elsewhere unless China decides to ramp up their purchases in the second half of 2020. Keep an eye on the flooding in China as they have lost over a million acres of farmland and will tighten their supplies. The higher crop conditions this week did not help prices either as they came as a surprise.

Soybeans and corn are in a similar situation where large yields are very much in play due to the weather of the past month and what looks to be coming. Soybean exports continue along at a good pace but nowhere near the Phase 1 agreement numbers that were expected. If China can ramp up their purchases in the coming months beans can get a boost that is unlikely to come without a weather problem. The good export news of late has been offset by good weather and higher expected yields which is frustrating seeing bullish news be uneventful for prices.

After a short term pull back from the near term highs markets bounced off a technical low and appear poised to give the highs another run.  Weather watchers will be tracking hurricane Isaias and it’s potential impact to the delta over the weekend.  In many cases the fear of hurricanes has been bigger than the actual punch.  In reality, following the storm days in advance does little good and is often a story of buy the rumor and sell the fact.  Look for prices to test the 65 cent level and be prepared to increase hedge protection above 63.50.

 

DOW Jones

The Dow continues its slight downtrend this week as Covid-19 cases remain high in many parts of the country. Despite good vaccine news coming out this week as several promising candidates move onto the next phase of trials, the Dow fell again. All eyes were on Capital Hill this week as Google, Facebook, Amazon and Apple’s CEOs were questioned by politicians looking at anti-trust issues. These were not huge market movers but something to keep an eye on as these companies have helped lead the charge up from the lows back in March along with other big tech companies.

Via Barchart.com

24 Jul 2020

Ag Markets Update: July 18 – 24

Corn held relatively steady this week after falling the past few weeks due to the June crop report. Exports have stayed consistent, but the lack of any weather problems is keeping corn in the range it is in. The cooler forecast with enough rain to support the crop is going to prevent upward price movement with the possibility of a 178 (trend line) yield still in play. China is the main buyer of U.S. Corn right now as major rains that are threatening the Three Gorges Dam area and throughout the Hubei Province have wiped out much of the non-U.S. crop.

The U.S. Department of Agriculture announced China’s largest ever corn purchase from the U.S. on July 14, totaling 1.762 million metric tons for delivery in 2020-21, and U.S. Grains Council President and CEO Ryan LeGrand tells Agri-Pulse that it’s more proof that demand is on the rise.

“We’ve always believed the demand is there,” LeGrand said. “They have been suffering from African swine fever, but they’re ringing the bell on these corn purchases.” (Ag Week)

Continued Chinese buying would be some good bullish news to balance out the bearish good weather news.

Soybeans gained on the week to reach the $9.00 mark again. China made several large purchases of U.S. soybeans this week despite the continued rising political tensions. The same destructive rains in the Hubei province that are wiping out corn will continue to have China buying U.S. ag products to make up for their potentially huge loses. The crop condition report this week was uneventful and as we approach the important stage for soybeans they look to be in good shape with the forecast being friendly as well. Beans have seemed to have had support at the 20 and 50 DMAs recently, so that should help moving forward even with the positive forecast.

A West Texas drought has been supportive for prices, but the lack of demand is the ultimate issue as prices can only move so high. If a healthy amount of rain moves into West Texas, look for prices to fall as a good yield and no buyers would present another problem. A weakening U.S. dollar may also provide some help as a lower U.S. Dollar means U.S. cotton is more affordable to other countries. In Other News see more info about the weakening U.S. Dollar.

 


U.S. Dollar
The Dollar has fallen 9.1% and made new 9 ½ month lows in today’s trade. With record U.S. debt and another stimulus package on the way, the Dollar has devalued endlessly by continuously running printing presses in DC. This is generally good for commodities as it indicates raw material inflation is on the horizon and that U.S. prices become more competitive as other currencies rally against the Dollar. Even though mildly helpful for the Ag industry, it’s not enough to fix the current oversupply problem.


(Bloomberg)

05 Jun 2020

Ag Markets Update: May 30- June 5

Planting is close to done in most parts of the country with over 90% of corn in the ground. Now the focus will turn to weather as early growing season is an important time. With a tropical depression in the gulf, it makes it difficult to predict future weather patterns as they are constantly changing. One model predicts for a drought type pattern in the southern plains and western corn belt as the tropical storm Cristobal pulls a lot of energy, so we’ll see how that pans out. Corn prices have been steady the past few weeks with few purchases to get excited about and no early problems to the U.S. corn crop. As long as yield estimates for U.S. corn stays high, there does not seem to be many reasons for a rally unless there is a weather event or we start to see large purchases. Ethanol production has remained steady as reserves are starting to go down, which will hopefully lead to more plants opening back up. The chart below is for July corn and you can see the change in the 20 day moving average as it has begun to tick up.

Soybean prices got a boost this week as Chinese buying continued, despite the government telling companies to quit buying many U.S. Ag products in retaliation to Trump’s comments and policies about Hong Kong last week. Despite what people thought would initially hurt Chinese purchases, tensions seem to be cooling between the two countries (for now). A huge week of soybean meal exports helped fund short covering that gave beans a big boost on Thursday. Continued buying from China would be very supportive for beans, but a decline could see a retreat after recent strength. Look for bean planting to continue its good progress over the next week.

Cotton traded above $.60/pound this week for the first time in the July contract since March 16. Rising futures prices with smaller open interest usually leads to a price reversal, which this price move has seemed to follow. With more open interest in the December contract month, look for more volatility moving forward as speculators will look there. We are barely into the start of hurricane season and already on hurricane number 3 forming in the gulf. A long and consistent hurricane season could do a great deal of damage to the southeast Cotton crop. Cotton has always been sensitive to the U.S. dollar, so a weakening dollar the last couple of weeks has been supportive to prices.

DOW Jones

The Dow Jones continues its climb as it topped 26,000 this week. The markets have recovered quicker than many expected to get to this point. As states across the country have opened back up investors have an optimistic outlook for the rest of 2020. Continuing progress on the Covid-19 vaccine and no spikes in positive test results are all good things for the market and overall economy of the US. This will help people get back to work quickly and hopefully minimize the damage of the long shutdowns.

Crude Oil

Crude continues its climb back to normal prices as OPEC is in discussions to continue production cuts for June. Even though the world is opening back up and oil demand will ramp up, drilling needs to happen at the same rate to not create an oversupply. This agreement being extended would be supportive for crude.

15 May 2020

AG MARKETS UPDATE: MAY 8-15

Corn planting in 2020 continued its strong pace last week as the crop is estimated to be at little less than 70% planted. This is well ahead of last year’s pace and with favorable weather outlooks for the rest of May, the crop should be 100% planted by June.

USDA Report
The May USDA Report came out on Tuesday and it’s safe to say it came of little surprise to most – the ‘19/20 US Corn Stocks were a little lower, while ‘19/20 World Corn Stocks were a bit higher.

The main adjustment was made in the Ethanol Corn numbers in ‘19/20 where they cut 100 million bushels. With Ethanol production averaging 17% lower than last year’s number through August, another 100 million bushels would need to be cut to meet lower demand. Even with the country opening back up, there are still uncertainties on demands as more people are interested in a car ride over jumping into a plane. Ultimately, this report just confirmed what everyone already knew: the world is drowning in corn. With a great start to planting and estimates of a trend line yield of 176+, this problem looks to continue for corn as the year goes on.

U.S. Soybean planting, like corn, continued its streak. As mentioned last week, China is well behind pace to meet the amount of ag goods purchased from the U.S. from Phase 1 of the trade agreement meaning U.S. bean prices are at the mercy of Chinese consumption. As political tensions continue to hover over the markets, prices will be dependent on U.S. and China political and/or export news. With the May USDA report being neutral to bearish, it has turned into a waiting game in the bean market as they continue to wait for buyers.

In the meats sector there is currently a disconnect between futures and cash prices; futures price is roughly $15-20 under the current cash price showing an immediate need for beef. The market is showing the packer margins are phenomenal and because of that, the packers are trying to throw the ranchers a bone by offering over the futures price, but not anywhere near the margin difference they are making. In essence, the packers are buying for relatively cheap and selling for a lot more than they usually would as supplies are tight. This is part of the reason the Trump administration is looking into the meat industry, as several large players are foreign-owned. China will not be buying any cattle from Australia due to their criticism over their handling of COVID-19, so some of that demand may be filled from the U.S. but seeing as we are struggling on our end with production, that would put another strain on the market.

Cotton looks to be experiencing a short squeeze this week on July futures. The Midsouth is behind on planting due to cool weather over the past couple of weeks; soil temps need to be above 65 degrees for planting and the mid-south has had several nights in the low 40s in May.

Cool temperatures are a little surprising this time of year, but I think we’ll get through that fairly unscathed. It’s warming up pretty fast, so it shouldn’t hurt us too badly. Dan Fromme (AgFax)

Cotton needs manufacturing around the world to ramp up as countries begin to drive demand. The USDA report this week was neutral-to-bearish and cotton has managed to hold on to most of its gains making short speculators nervous. They’ll be keeping a close eye on Thursday exports as there’s only one month remaining in the July futures contract. Buying from China, like with any other commodity right now, would be a welcome sight.

Relief Package
The House is expected to vote on another round of financial stimulus equaling out to $3 trillion. In this bill, $16.5 billion may be earmarked for direct farm payments and help for the ethanol and biofuel industry. It may also direct the USDA to reimburse any livestock producer that had to euthanize animals due to closed processing facilities (more on that here).