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Transcript

Daily Market Podcast May 19 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Tuesday, May 19th.
• 0:07
  SPEAKER_00: Walking in this morning, July corn is up two at 479.
• 0:10
  SPEAKER_00: July soybeans are up three and three quarters at 12.16 and three quarters.
• 0:15
  SPEAKER_00: June crude is down 40 cents at 104 even.
• 0:19
  SPEAKER_00: The U.S.
• 0:20
  SPEAKER_00: China ag deal is the still the key point of news this morning.
• 0:25
  SPEAKER_00: There are all kinds of estimates floating around regarding how much corn and soybeans could go to China with this deal.
• 0:32
  SPEAKER_00: Most estimates that we have seen are somewhere between 5 and 8 million tons of corn and 25 and 30 million tons of soybeans.
• 0:39
  SPEAKER_00: Anywhere in that range is very bullish for corn and beans, especially in the near term, the next six months.
• 0:46
  SPEAKER_00: Specifically on corn news this morning, before we get into China, let's look at U.S.
• 0:51
  SPEAKER_00: planning pace.
• 0:52
  SPEAKER_00: As of yesterday, U.S.
• 0:54
  SPEAKER_00: corn planning was 76% complete, equal to last year, and ahead of 70% average on this date.
• 1:00
  SPEAKER_00: The two states that are notably behind are Kansas due to dryness and Michigan due to cool, wet conditions they've had.
• 1:08
  SPEAKER_00: As a matter of fact, in Kansas, we have final crop insurance planning dates for corn coming up later this month.
• 1:16
  SPEAKER_00: I believe they're May 25th.
• 1:18
  SPEAKER_00: Um I'm checking on that one.
• 1:19
  SPEAKER_00: I believe they're the 25th.
• 1:22
  SPEAKER_00: And there's very little rain in the forecast.
• 1:25
  SPEAKER_00: I believe we run the risk of losing corn acres in Kansas, particularly given that fertilizer costs have gone up and they've become so expensive.
• 1:34
  SPEAKER_00: But yet again, here's one more ding.
• 1:38
  SPEAKER_00: We cannot lose corn production.
• 1:42
  SPEAKER_00: But here we are.
• 1:43
  SPEAKER_00: Here's another potential ding of us maybe losers of corn acres in Kansas.
• 1:48
  SPEAKER_00: And Kansas has become one of the largest corn acreage states in the nation now.
• 1:55
  SPEAKER_00: Um, and if we're looking at to start shipping somewhere between five and eight million tons of corn a year to China, this is more export demand that we do not have room for.
• 2:08
  SPEAKER_00: Yet another risk that we are tightening up corn ending stocks.
• 2:13
  SPEAKER_00: Meanwhile, weekly U.S.
• 2:16
  SPEAKER_00: corn export pace remains solid.
• 2:18
  SPEAKER_00: Outstanding corn export sales, corn that is sold but not yet shipped, are still very big.
• 2:25
  SPEAKER_00: This market, this corn market will be ultra sensitive to reports of China coming in and bidding for corn at the U.S.
• 2:33
  SPEAKER_00: Gulf or ports on the PNW, Pacific Northwest.
• 2:38
  SPEAKER_00: With this threat of corn demand, I remain sodly in the camp that CBOT corn trades steady to higher in the near term, and any breaks will be very well supported.
• 2:51
  SPEAKER_00: As for bean news, U.S.
• 2:54
  SPEAKER_00: soybean planting pace continues to be ahead of average, but if you look at the last 10 years, there has been a really strong trend to plant soybeans earlier and earlier and earlier.
• 3:04
  SPEAKER_00: So maybe we're really not that far ahead of where we should be.
• 3:08
  SPEAKER_00: As of yesterday, U.S.
• 3:09
  SPEAKER_00: soybeans were 67% planted, which mathematically is right at one week ahead of the five-year average.
• 3:17
  SPEAKER_00: As for China trade, we've all seen the White House ag trade announcement.
• 3:21
  SPEAKER_00: Well, yesterday, China released their version, which was very vague, simply saying that an agreement was reached on agricultural trade and tariff reductions.
• 3:33
  SPEAKER_00: Very vague.
• 3:49
  SPEAKER_00: This keeps U.S.
• 3:50
  SPEAKER_00: soybean supplies tight until we harvest the South American crop next starting February, March of next year, and Brazil can begin exporting beans and can fill in the voids in the world.
• 4:03
  SPEAKER_00: Therefore, CBOT soybeans should stay very well supported on breaks.
• 4:09
  SPEAKER_00: And when the market sees China actually buying those beans, we rally very easily.
• 4:16
  SPEAKER_00: The charts I have in today are uh corn planting and soybean planting pace for the U.S.
• 4:21
  SPEAKER_00: Uh we've all seen those before.
• 4:23
  SPEAKER_00: As for rainfall in the next uh four or five days, we've got a uh very active pattern uh across Texas into southeastern Oklahoma, Arkansas, across into the Mississippi and uh western uh Tennessee.
• 4:41
  SPEAKER_00: And then you follow that up next week with pretty much rains in the same area.
• 4:46
  SPEAKER_00: Uh so we're going to, if this rainfall pattern uh holds true, we're going to dramatically shrink the dry area uh in the south and mid-south.
• 4:57
  SPEAKER_00: Uh if you look further down the road, you look out uh your six to ten and eighteen, uh eight to fourteen day forecast, it looks like we're going to be uh normalish to above normal precip, particularly in southern areas, and temperatures uh warm up.
• 5:14
  SPEAKER_00: Uh so uh those far northern areas should be able to get the rest of their corn planted.
• 5:19
  SPEAKER_00: That's it for today.
• 5:20
  SPEAKER_00: Thanks for listening.
• 5:21
  SPEAKER_00: We'll be back tomorrow.