Latest / M6 Capital Daily Market Podcast / Daily Market Podcast Aug 26

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Daily Market Podcast Aug 26 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:00
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Wednesday morning, August 26th.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is up five cents at 5.28 and 3 quarters.
• 0:11
  SPEAKER_00: November beans are up 5 and 3 quarters at 12.43 and a half.
• 0:16
  SPEAKER_00: December meal is up 460 at 333.90.
• 0:21
  SPEAKER_00: And October crude continues to leak lowers down$1.90 at$80.50 this morning.
• 0:27
  SPEAKER_00: Before we get into corn and beans, um, we have not for a while now discussed this India monsoon.
• 0:34
  SPEAKER_00: Um, the monsoonal rains in India are very seasonal and very predictable.
• 0:41
  SPEAKER_00: Um, and we've discussed earlier this year that we have a very strong El Nino situation, and historically, El Nino situation affects quite a few weather scenarios globally, and that typically means a weak monsoon for India.
• 1:00
  SPEAKER_00: A weak monsoon means less than normal rainfalls, and this year the monsoon rains have not been good.
• 1:08
  SPEAKER_00: Uh and by not good, that means less than normal precip over a broad area, and that this summer that impacts soybean crops and peanut crops, and it also impacts irrigation supplies for wheat this winter and next spring.
• 1:28
  SPEAKER_00: So this is in the backdrop of global grain supplies already having issues.
• 1:36
  SPEAKER_00: Here's another in one of the world's most populous nations that all of a sudden they have issues with uh total grain supplies because of this.
• 1:46
  SPEAKER_00: So I have a map on the bottom of page one that just shows uh percent of normal precip so far this year from June 1 to which is typically when the monsoon rains start, until uh yesterday.
• 1:58
  SPEAKER_00: So, anyway, worth taking a look at.
• 2:00
  SPEAKER_00: Moving on to corn news.
• 2:02
  SPEAKER_00: Uh, today let's talk about corn exports.
• 2:05
  SPEAKER_00: And I I know I keep focusing on this, but this is the big demand variable in the background that is providing underlying support for the whole corn market.
• 2:17
  SPEAKER_00: And we have fully discussed how global corn demand is huge, and global corn exports month after month after month are record large.
• 2:25
  SPEAKER_00: But if you look at the top five global corn exporters, Russia and Ukraine are exporting very, very little right now, and does not look like that's going to change anytime soon.
• 2:35
  SPEAKER_00: Brazilian corn exports in August look to be down at least 20% from last year.
• 2:41
  SPEAKER_00: So that leaves Argentina in the U.S.
• 2:43
  SPEAKER_00: Argentina is pumping out record corn shipments.
• 2:47
  SPEAKER_00: But that is basically just making up for the down numbers in Russia and Ukraine and Brazil.
• 2:54
  SPEAKER_00: So that leaves the U.S.
• 2:56
  SPEAKER_00: with massive shoes to fill.
• 2:58
  SPEAKER_00: We have the corn supplies, or at least we do right now, and we have the capacity to export.
• 3:03
  SPEAKER_00: August corn exports out of the U.S.
• 3:05
  SPEAKER_00: look to be the biggest of any single month in at least five years.
• 3:11
  SPEAKER_00: And the world needs the U.S.
• 3:12
  SPEAKER_00: doing this month after month after month after month.
• 3:16
  SPEAKER_00: That becomes the issue.
• 3:18
  SPEAKER_00: If the U.S.
• 3:19
  SPEAKER_00: corn yield is 176, 177, which I firmly believe it is, and the US is exporting uh that much corn, we have plenty of corn to do that type of export business for the next four or five months, sure.
• 3:35
  SPEAKER_00: But there comes a time next spring where total corn US corn demand, exports or domestic, somehow that demand needs to slow down.
• 3:47
  SPEAKER_00: Or we are mathematically working ourselves into a very tight corn situation.
• 3:53
  SPEAKER_00: So here's to me another question.
• 3:55
  SPEAKER_00: Does the corn market go higher right now and try to accomplish that rationing job now?
• 4:01
  SPEAKER_00: Or does the market deal with that later, like next spring?
• 4:05
  SPEAKER_00: History strongly suggests that the market will deal with that in the spring when supplies actually become uh start to tighten some.
• 4:14
  SPEAKER_00: Now, corn and beans and wheat all rallied yesterday and they're firm again this morning.
• 4:20
  SPEAKER_00: Personally, I see this as random noise.
• 4:23
  SPEAKER_00: I don't see this as a big bull push right now.
• 4:27
  SPEAKER_00: I think the market, any breaks in the market will be well supported.
• 4:30
  SPEAKER_00: I just don't know that corn is gonna take off and try to go to six and a half, seven dollars right now.
• 4:37
  SPEAKER_00: In the spring, yes, very likely.
• 4:41
  SPEAKER_00: I moving on to soybeans.
• 4:43
  SPEAKER_00: Um again, soybeans have way too many moving parts.
• 4:48
  SPEAKER_00: Yesterday, China denounced any further U.S.
• 4:52
  SPEAKER_00: trade sanctions on Iran.
• 4:54
  SPEAKER_00: We knew that was coming.
• 4:55
  SPEAKER_00: So now we have an issue with China.
• 4:58
  SPEAKER_00: And the last several days we have seen soybean bases at the Gulf weaken.
• 5:03
  SPEAKER_00: Some of that is due to a little bit of harvest occurring in the Mid South, but some of that is due to slowing interest out of China.
• 5:11
  SPEAKER_00: And this trade war with Canada likely means less canola oil imports from Canada, and that's bullish U.S.
• 5:19
  SPEAKER_00: soybean oil prices.
• 5:20
  SPEAKER_00: But then you got a crude oil that continues to go down day after day, and that's bearish for bean oil.
• 5:26
  SPEAKER_00: Again, a lot of move apart.
• 5:28
  SPEAKER_00: I remain in the camp that CBOT soybeans should bounce around for a while, very likely lacking overall direction.
• 5:37
  SPEAKER_00: I'm not getting bearish.
• 5:39
  SPEAKER_00: I just don't think this rally can continue right here, right now.
• 5:44
  SPEAKER_00: Um, at the bottom of page one, I've got a chart of uh, like I mentioned earlier, of monsoonal rains thus far in India.
• 5:52
  SPEAKER_00: Worth taking a look at.
• 5:59
  SPEAKER_00: Um, this week, something closer to normalish type rains in the central and northern areas of the corn belt next week, which those northern areas definitely need those rains.
• 6:11
  SPEAKER_00: Uh high temp, we still got some warm, warm temperatures.
• 6:15
  SPEAKER_00: Uh, Texas, Oklahoma, Arkansas, Louisiana, Mississippi, um, the next several days.
• 6:23
  SPEAKER_00: Um, those temperatures continue to hang around, maturing crops quicker than what they they otherwise should be.
• 6:30
  SPEAKER_00: Um, longer term, uh, and this is looking out two weeks, three weeks, it looks like the bulk of the cornbelt is going to be something close to normal-ish type rainfall, uh, which that we definitely need.
• 6:44
  SPEAKER_00: And not only, and in particular those dry areas of the uh northern cornbelt and northwestern cornbelt, they don't need just normal rainfall.
• 6:54
  SPEAKER_00: They need normal rainfall and they need that rain occurring every two, three days because their soil moisture conditions have really gone downhill.
• 7:01
  SPEAKER_00: So, anyway, that's it for today.
• 7:03
  SPEAKER_00: Thanks for listening.
• 7:04
  SPEAKER_00: We'll be back tomorrow.