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Transcript

Daily Market Podcast Jul 13 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers of the M6 Capital Management with our daily market letter on Monday, July 13th.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is up five and a half at 466 and three-quarters.
• 0:11
  SPEAKER_00: November soybeans are up four and three quarters at 1195 and a half.
• 0:15
  SPEAKER_00: August crude is up 240 at 7380.
• 0:19
  SPEAKER_00: First things, uh, we need to talk to about this Ukraine-Russian war.
• 0:25
  SPEAKER_00: Ukraine and Russia have both escalated attacks on grain export facilities in the last several days.
• 0:31
  SPEAKER_00: During the day on Friday, it became apparent that Ukraine had used drones and attacked grain export facilities and ships carrying Russian grain in the Sea of Azov.
• 0:42
  SPEAKER_00: This is the small body of water that flows into the Black Sea, and this is where a huge chunk of Russia's grain exports flow out of.
• 0:51
  SPEAKER_00: Over the weekend, Russia uh also attacked more Ukrainian export facilities.
• 0:58
  SPEAKER_00: So the flow of grain from this whole area, especially Russian wheat, will be very limited for the near future.
• 1:06
  SPEAKER_00: This fueled some of the rally in CVOT corn and wheat on Friday.
• 1:11
  SPEAKER_00: Moving on to corn news, um, USDA's report on Friday showed ending stocks for the upcoming 26-27 crop year, 100 million bushels smaller than the average market guess.
• 1:22
  SPEAKER_00: In the mix of changes that USDA made, they lowered EU corn production, which we've talked about uh for quite a while now.
• 1:31
  SPEAKER_00: They increased global corn import demand and they increased U.S.
• 1:36
  SPEAKER_00: corn exports.
• 1:38
  SPEAKER_00: So I contend that they made changes that are in the right direction, but likely not enough.
• 1:45
  SPEAKER_00: I'm still in the camp that U.S.
• 1:46
  SPEAKER_00: corn exports will likely be much larger than what UST is estimating, and that will eventually mean smaller U.S.
• 1:55
  SPEAKER_00: corn ending stocks.
• 1:57
  SPEAKER_00: Also, these recent bombings uh by Ukraine and Russia will limit grain exports flows, especially wheat.
• 2:05
  SPEAKER_00: And if you remember, we've already lost uh a lot of global wheat production this year.
• 2:10
  SPEAKER_00: Now we have even more wheat supplies uh that we're losing.
• 2:15
  SPEAKER_00: This means more wheat feeding will need to be replaced, and that's likely going to have to come from corn.
• 2:22
  SPEAKER_00: So, net net bigger corn demand.
• 2:25
  SPEAKER_00: Meanwhile, in Europe, the corn crop continues to slide downhill.
• 2:29
  SPEAKER_00: On the bottom of page one, I've got a chart of the corn crop ratings in France, which are now the worst crop ratings on record for mid-July.
• 2:38
  SPEAKER_00: France's corn crop is 40 on Friday, was 42% silking.
• 2:43
  SPEAKER_00: So, right now is their highest water use phase for their corn production, and they are bone dry and they're still hot.
• 2:50
  SPEAKER_00: Not good.
• 2:51
  SPEAKER_00: Back in the U.S., the weather forecast for the next two weeks is dry and warm across the corn belt.
• 2:56
  SPEAKER_00: So we should see U.S.
• 2:58
  SPEAKER_00: crop ratings decline.
• 3:00
  SPEAKER_00: All of this is supportive to CBOT corn futures, and we still have zero interest from China buying U.S.
• 3:08
  SPEAKER_00: corn.
• 3:09
  SPEAKER_00: If that occurs, CBOT corn could race higher very quickly.
• 3:13
  SPEAKER_00: So obviously, I remain bullish on CBOT corn.
• 3:18
  SPEAKER_00: Moving on to soybeans, USTA soybean numbers on Friday were just simply not bullish.
• 3:23
  SPEAKER_00: They were a big nothing.
• 3:25
  SPEAKER_00: But we did see China in buying more U.S.
• 3:28
  SPEAKER_00: soybeans.
• 3:29
  SPEAKER_00: And the market hears the words Chinese buying and it rallies.
• 3:33
  SPEAKER_00: It's simple as that.
• 3:34
  SPEAKER_00: Again, we do not think this is some massive 25 million ton buying program that has got to occur right now.
• 3:42
  SPEAKER_00: This is China buying beans from whoever is the cheapest.
• 3:45
  SPEAKER_00: And for September and October shipment, that's U.S.
• 3:49
  SPEAKER_00: Uh, we are a little bit cheaper than Brazil right now.
• 3:53
  SPEAKER_00: As far as Brazil goes, this year we're seeing more and more beans in Brazil flowing to crushers.
• 3:58
  SPEAKER_00: Their crush pace the last several months is record large, and that has firmed up prices for September, October, November.
• 4:06
  SPEAKER_00: Thus, U.S.
• 4:07
  SPEAKER_00: is back cheaper for those time periods.
• 4:09
  SPEAKER_00: As for the U.S.
• 4:10
  SPEAKER_00: weather, the next two weeks is concerning for beans, but it's not nearly as important as it is for corn.
• 4:16
  SPEAKER_00: I remain in the count that longer term, it's hard to be bullish CVOT soybeans.
• 4:22
  SPEAKER_00: Rallies are meant to be sold, but we may need to give this market a little bit of room to rally over the next several weeks before we think about doing that.
• 4:30
  SPEAKER_00: Um moving on to weather.
• 4:32
  SPEAKER_00: Like I said, we've got basically dry weather the next uh 10 days, two weeks over the corn belt, and temperatures, particularly this week, are going to be uh warm across the country and smoking hot in North Dakota, South Dakota parts of Nebraska with temperatures.
• 4:52
  SPEAKER_00: Um, you've got hundreds somewhere in South Dakota for I think starting today and lasting through at least next Sunday.
• 5:02
  SPEAKER_00: Uh so their corn crop in those areas is is gonna go downhill pretty quickly.
• 5:07
  SPEAKER_00: Um that's it for today.
• 5:09
  SPEAKER_00: Thanks for listening.
• 5:10
  SPEAKER_00: We'll be back tomorrow.