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Transcript

Daily Market Podcast Jun 24 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers with M6 Capital Management.
• 0:04
  SPEAKER_00: Before we get started this morning, I sent out a report late yesterday afternoon on what some Iranian ag business could look like for the U.S.
• 0:16
  SPEAKER_00: This is following J.D.
• 0:18
  SPEAKER_00: Vance's statements on Monday that we could be sending corn, wheat, and soybeans to Iran.
• 0:26
  SPEAKER_00: So I put out a report yesterday just what could that look like?
• 0:30
  SPEAKER_00: And I advise everybody if you hadn't seen it, take a look at it.
• 0:34
  SPEAKER_00: The conclusion is if that actually occurs, then that could be quite bullish for corn, for hard red wheat, and for meal, U.S.
• 0:44
  SPEAKER_00: meal prices.
• 0:45
  SPEAKER_00: So anyway, just take a look if you hadn't seen that.
• 0:48
  SPEAKER_00: So, all right, on to our daily market letter.
• 0:51
  SPEAKER_00: Uh today is Wednesday, June 24th.
• 0:55
  SPEAKER_00: Walking in this morning, we got December corn up one and a half at 439.
• 1:00
  SPEAKER_00: We got November beans up two at 11.43 and a quarter.
• 1:04
  SPEAKER_00: August crude continues to slip slide lower down 210 this morning at 71.10.
• 1:10
  SPEAKER_00: On corn news this morning, and we're going to focus quite a bit on corn today.
• 1:14
  SPEAKER_00: Uh U.S.
• 1:14
  SPEAKER_00: crop weather remains mostly non-threatening.
• 1:17
  SPEAKER_00: We can argue that parts of Nebraska and Colorado need more rain.
• 1:21
  SPEAKER_00: We can argue that parts of Illinois are too wet.
• 1:24
  SPEAKER_00: But overall, let's just be honest, there's no major widespread issues.
• 1:29
  SPEAKER_00: And the CBOT corn market is bouncing around looking for direction.
• 1:33
  SPEAKER_00: This morning, we are trading the same price that we traded two weeks ago.
• 1:37
  SPEAKER_00: But we have multiple lingering issues that this corn market will eventually have to face.
• 1:43
  SPEAKER_00: First, Ukraine should be the third or maybe fourth largest corn export in the corn exporter in the world right now.
• 1:51
  SPEAKER_00: But the corn export pace out of Ukraine is pathetically small right now, in large part because of ongoing issues with Russia.
• 1:59
  SPEAKER_00: Second, the corn crop in Europe is being slapped in the face.
• 2:03
  SPEAKER_00: We've already talked about multiple times.
• 2:05
  SPEAKER_00: Their main corn area has been dry for weeks and weeks.
• 2:10
  SPEAKER_00: And then this week we've had 100 degree plus and at times 105 degree plus temperatures across major corn producing areas.
• 2:18
  SPEAKER_00: Corn in Spain, France, and Italy is already beginning to pollinate.
• 2:22
  SPEAKER_00: So you put several weeks of dry weather and 100 degree plus temperatures right when it's pollinating.
• 2:29
  SPEAKER_00: Doesn't take a rocket scientist to figure out that just ain't good for corn.
• 2:33
  SPEAKER_00: Now the problem here is that Europe, because of issues with fertilizer prices and fuel prices at the time of planting, Europe planted the smallest area to corn in over 25 years.
• 2:48
  SPEAKER_00: And if you look at this weather forecast, they continue to be hot and dry for the next two plus weeks.
• 2:57
  SPEAKER_00: So if you look at forecasts going forward and you just back off of their yields a little bit from trend, you end up with the smallest corn crop in at least 20 years in Europe.
• 3:12
  SPEAKER_00: I've got a chart on this at the bottom of page one.
• 3:15
  SPEAKER_00: Net net, this means more corn import demand down the road.
• 3:20
  SPEAKER_00: And global corn import demand right now is which we've already talked about, is already massive.
• 3:26
  SPEAKER_00: Third, corn exports out of Brazil look to be down big time this year because of their small corn crop, which we've already discussed, and big ethanol demand.
• 3:35
  SPEAKER_00: And we hadn't even talked about China yet.
• 3:38
  SPEAKER_00: So right now the U.S.
• 3:41
  SPEAKER_00: crop condition ratings are okay and the market is very complacent.
• 3:49
  SPEAKER_00: In our office, just to kind of let you know where our brain is, we're already having discussions that if all of this global import demand hits, including some of China, maybe some of Iran, we're to a point where I don't know that the U.S.
• 4:08
  SPEAKER_00: can fully execute everything that the the world is going to need from it.
• 4:14
  SPEAKER_00: So that that's where we're looking, okay?
• 4:17
  SPEAKER_00: Um but the point is this the corn market seems to be really focused on one item right now, and that's the U.S.
• 4:26
  SPEAKER_00: crop is doing okay, and the condition ratings are okay, and they're not paying attention to any of these other issues at all.
• 4:33
  SPEAKER_00: The closest analogy that I can come up with is this thing is a ticking time bomb.
• 4:38
  SPEAKER_00: I continue to believe that CBOT corn has quite a bit more upside than downside, maybe a lot of upside to it.
• 4:45
  SPEAKER_00: And at some point down the road, the market is going to have to address these issues whether it wants to or not.
• 4:51
  SPEAKER_00: Moving on to soybeans, CBOT meal continues to slip slide lower.
• 4:56
  SPEAKER_00: Yesterday, July meal traded the lowest price it has traded since the first week of February.
• 5:01
  SPEAKER_00: And we've talked about export demand, backing off, and whatnot.
• 5:05
  SPEAKER_00: Okay.
• 5:06
  SPEAKER_00: Meanwhile, soybean market seems to really be focused on two items right now.
• 5:10
  SPEAKER_00: One, kind of like corn, the U.S.
• 5:13
  SPEAKER_00: crop is doing okay.
• 5:14
  SPEAKER_00: And second, China has not come in buying lots and lots of soybeans.
• 5:19
  SPEAKER_00: China was on a national holiday most of last week.
• 5:21
  SPEAKER_00: They're back at work this week, but still no Chinese business showing up.
• 5:26
  SPEAKER_00: So CBOT soybeans are waiting for something to determine their direction.
• 5:32
  SPEAKER_00: Meanwhile, in the background, U.S.
• 5:34
  SPEAKER_00: soybean export business is slowly getting better and better.
• 5:38
  SPEAKER_00: We have discussed that U.S.
• 5:39
  SPEAKER_00: Gulf bean prices are cheaper than Brazil and Argentina August forward.
• 5:46
  SPEAKER_00: So export demand is starting to show up in the Gulf again.
• 5:50
  SPEAKER_00: But until we get some U.S.
• 5:52
  SPEAKER_00: crop weather issue or China shows up, CBOT soybeans bounce around like a rubber ball on a broken sidewalk.
• 6:00
  SPEAKER_00: Moving on to weather, we've got a pretty good string of rains coming across from uh western Nebraska all the way to Ohio in the next several days.
• 6:12
  SPEAKER_00: Uh following that, you've got just light-scattered rains across Corn Belt.
• 6:16
  SPEAKER_00: Again, uh no threatening weather uh in the near future.
• 6:21
  SPEAKER_00: And then we've got several maps on page two on Europe.
• 6:25
  SPEAKER_00: And if you look at the next 15 days, most of the corn growing area in Spain, France, parts of Germany is gonna have is only forecast to have a quarter to maybe a half inch of rain in the next 15 days, and temperatures are going to be, you know, in the upper 90s and in some cases over 105 degrees for days and days, really for most of the next week.
• 6:53
  SPEAKER_00: So that corn crop is going downhill at a pretty fast rate.
• 6:59
  SPEAKER_00: That's all we have for today.
• 7:00
  SPEAKER_00: Thanks for listening.
• 7:01
  SPEAKER_00: We'll be back tomorrow.