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Daily Market Podcast Aug 27 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:00
  SPEAKER_00: This is Chris Myers of Land Six Capital Management with our daily market letter on Thursday, August 27th.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is down two and a quarter at 534.
• 0:11
  SPEAKER_00: November soybeans are down five and a quarter at 1260 and three quarters.
• 0:15
  SPEAKER_00: December meal is up 280 at 340 to 10.
• 0:19
  SPEAKER_00: And October crude is up 30 cents at 82.50.
• 0:24
  SPEAKER_00: So yesterday was all about Putin.
• 0:29
  SPEAKER_00: Yesterday began as a day that looked somewhat normal, and we thought we somewhat understood what was driving grain markets yesterday and how the market was behaving.
• 0:41
  SPEAKER_00: And then Putin opened his mouth.
• 0:44
  SPEAKER_00: And Ukraine had been working on some amount of effort at some peace deal with Russia.
• 0:52
  SPEAKER_00: And Putin declared that the peace negotiations had reached a dead end and they were over.
• 0:58
  SPEAKER_00: And then people around Putin claimed that, and I quote, Moscow is preparing to intensify, intensify condition conventional, man.
• 1:08
  SPEAKER_00: I can't even talk this morning.
• 1:28
  SPEAKER_00: And that's when chaos hit the CBOT grain markets.
• 1:32
  SPEAKER_00: Wheat led the rally, it traded limit up and is up again this morning.
• 1:37
  SPEAKER_00: And corn and beans followed just because.
• 1:41
  SPEAKER_00: So let's focus on corn here for a second.
• 1:46
  SPEAKER_00: So the grain markets basically decided that no grain will ever leave Russia or Ukraine ever again, and let's price all that in today.
• 1:58
  SPEAKER_00: Well, the truth of it is that corn and wheat export flows have been already been dramatically cut for weeks and weeks from Russia and Ukraine.
• 2:08
  SPEAKER_00: But nevertheless, the market rallied, and here we are.
• 2:12
  SPEAKER_00: Meanwhile, weekly U.S.
• 2:15
  SPEAKER_00: ethanol production continues to be big.
• 2:18
  SPEAKER_00: Ethanol exports continue to be strong.
• 2:21
  SPEAKER_00: Corn planting begins in both Brazil and Argentina next month, so we need to watch and make sure that they have no planting issues.
• 2:29
  SPEAKER_00: Right now, both areas could use more rain, and that's not in the forecast.
• 2:34
  SPEAKER_00: You will see that on page two.
• 2:46
  SPEAKER_00: If we assume that their crops go okay, planting goes okay, growing season goes okay, then I strongly lean towards two analog years.
• 2:56
  SPEAKER_00: And I'll have a chart of those below.
• 2:57
  SPEAKER_00: The summer of 2021 and the summer of 2022.
• 3:02
  SPEAKER_00: In each of those years, we ended up with tight U.S.
• 3:06
  SPEAKER_00: corn stocks and prices in the spring and summer had rallied a lot to slow down demand.
• 3:12
  SPEAKER_00: 2021 hit$7.32.
• 3:16
  SPEAKER_00: 2022 hit$8.13.
• 3:19
  SPEAKER_00: Which clearly suggests a lot of upside to the July 27th contract, which is currently trading at$5.55.
• 3:29
  SPEAKER_00: So um, so a lot of upside.
• 3:32
  SPEAKER_00: I remain very bullish longer term, but I do feel like it will be hard for this market to rally right here, right now, with the UF's harvest right ahead of us.
• 3:43
  SPEAKER_00: As far as soybeans, I gotta admit, I don't really understand why CBOT soybeans rallied so aggressively yesterday.
• 3:51
  SPEAKER_00: Russia and Ukraine exported a little bit of sunflower and rapeseed oil, but quite frankly, it's just not that big of a deal.
• 3:58
  SPEAKER_00: Uh to me, it had much more to do with November beans took out yesterday, took out last week's high, and technical and trend following trading models just took over buying it uh and just ran over everybody.
• 4:12
  SPEAKER_00: CBOT meal rallied to the highest price since mid-May.
• 4:17
  SPEAKER_00: Now, Russia and Ukraine combined export somewhere in the neighborhood of five and a half to six million tons of sunflower seed meal a year, and you know, 500,000 to 800,000 tons of rapeseed meal a year.
• 4:38
  SPEAKER_00: This is not, just quite frankly, not a major amount of meal as far as global meal supplies go.
• 4:47
  SPEAKER_00: So to me, it certainly feels like CBOT soybeans and meal have run plenty far to the upside, at least for right now.
• 4:56
  SPEAKER_00: Um like I said earlier, I've got a chart of those two analog uh years on uh the bottom of page one.
• 5:05
  SPEAKER_00: Well worth taking a look at.
• 5:07
  SPEAKER_00: Um, as far as weather goes, again, we've got the next four, five, six days are basically going to be dry across the corn belt, light scattered stuff in the far north of the corn belt, and that continues well in the next week.
• 5:20
  SPEAKER_00: I do have a 10-day precip map on here for South America, if you'll notice.
• 5:26
  SPEAKER_00: Uh, central Brazil, Brazil, particularly uh Mato Grosso, not a drop of rain coming.
• 5:32
  SPEAKER_00: Um, central part of Argentina, also very, very uh light rains.
• 5:39
  SPEAKER_00: Um, both areas, particularly Brazil, uh, need more rain uh before planting occurs.
• 5:44
  SPEAKER_00: So we need to keep an eye on that.
• 5:47
  SPEAKER_00: That's it for today.
• 5:48
  SPEAKER_00: Thanks for listening.
• 5:49
  SPEAKER_00: We'll be back tomorrow.