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Daily Market Podcast Sep 23 · 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, September 23rd.
• 0:07
  SPEAKER_00: And we have got a lot of things to talk about today.
• 0:11
  SPEAKER_00: First off, um, I sent out a report yesterday on this Super El Nino.
• 0:16
  SPEAKER_00: If you haven't had a chance to look at that, um, please take a look.
• 0:19
  SPEAKER_00: If you have any questions, let me know.
• 0:22
  SPEAKER_00: And also today, we really, really need to be talking about what's going on with these US and China meetings.
• 0:28
  SPEAKER_00: And maybe it's not as sexy as what the market wants to see.
• 0:32
  SPEAKER_00: So, walking in this morning, De Summer corn is down six cents at 5.30 and a half.
• 0:37
  SPEAKER_00: November beans are down nine and a half or nine and a quarter, sorry, at 13, 16 and a quarter.
• 0:42
  SPEAKER_00: Uh, December meal is down$1.20, and November crude is up 20 cents at 90.60 this morning.
• 0:50
  SPEAKER_00: So let's start with China.
• 0:54
  SPEAKER_00: Um, first, I want to highlight that uh CBOT grain markets are fully expecting some type of ag trade deal with China this week.
• 1:04
  SPEAKER_00: Back in April, and we've talked about this already, but just so everybody understands the facts, back in April, uh following Trump's meeting in Beijing, the White House announced that China was going to buy$17 billion worth of U.S.
• 1:18
  SPEAKER_00: ag goods annually for three years.
• 1:21
  SPEAKER_00: Behind the scenes, the administration was telling people this would be a big deal for grain exports out of the U.S.
• 1:28
  SPEAKER_00: Okay, so as far as China goes, they have never acknowledged this$17 billion agreement.
• 1:37
  SPEAKER_00: So the market is absolutely expecting some confirmation that China has agreed to the$17 billion on their visit this week.
• 1:47
  SPEAKER_00: And like us, many other people in the market have gone through the numbers, like I emailed out a couple of days ago, and they've come to the conclusion that this trade deal must include somewhere between six and eight million tons of corn, two to four million tons of wheat, some cotton, some beef.
• 2:09
  SPEAKER_00: There's simply no way around it.
• 2:10
  SPEAKER_00: It has to.
• 2:12
  SPEAKER_00: But yesterday, U.S.
• 2:14
  SPEAKER_00: Trade Representative Greer really threw a giant monkey wrench into that entire equation.
• 2:21
  SPEAKER_00: In a press conference, he made two key statements.
• 2:24
  SPEAKER_00: Number one, he stated that there is, and I quote here, no grand bargain to be made with China.
• 2:31
  SPEAKER_00: I'm sorry, to be made with Beijing.
• 2:34
  SPEAKER_00: And number two, he stated that China is already fulfilling its agreement and has bought four billion dollars worth of U.S.
• 2:42
  SPEAKER_00: ag goods this year.
• 2:44
  SPEAKER_00: So in other words, the trade deal with China has already been made and China is doing their part.
• 2:52
  SPEAKER_00: Now, let's go over the facts here a little bit.
• 2:55
  SPEAKER_00: The$4 billion is true if you count all the tree nuts and sausage casings and cattle hides and peanuts and pork scrap meat and etc.
• 3:06
  SPEAKER_00: But his whole statement is ridiculous.
• 3:08
  SPEAKER_00: First off, he's counting ag purchases made by China before this April trade deal was ever made, which is honestly quite strange.
• 3:20
  SPEAKER_00: And second, he stayed his stated total four billion dollars is January through July, six months.
• 3:28
  SPEAKER_00: And yeah, they bought four billion dollars worth of ag goods.
• 3:33
  SPEAKER_00: But mathematically, I'm not the smartest guy out there, but there's no way to continue at this six-month pace and get to 17 billion in 12 months.
• 3:44
  SPEAKER_00: But Greer's statement strongly suggests that China is already doing their part.
• 3:51
  SPEAKER_00: So this really, really, really questions if this 17 billion dollars will ever happen, and if certainly questions if China will ever buy U.S.
• 4:02
  SPEAKER_00: corn or wheat or cotton, etc.
• 4:05
  SPEAKER_00: This is absolutely not what the market wants to see right now.
• 4:10
  SPEAKER_00: So we sold off yesterday after his statements came out, and corn's down six and beans are down nine right now.
• 4:19
  SPEAKER_00: So um, as far as corn goes, clearly the corn market is all dressed up for the dance, and it may have no place to go.
• 4:29
  SPEAKER_00: Speculators, like we've talked about, they have a record large loans position.
• 4:33
  SPEAKER_00: And if we don't get some positive announcement on trade to China, this thing is absolutely going to be a house of cards.
• 4:39
  SPEAKER_00: The big meeting will be tomorrow between Trump and Z.
• 4:43
  SPEAKER_00: I think Z is flying in tonight.
• 4:45
  SPEAKER_00: The market will expect some positive news on grain trade.
• 4:48
  SPEAKER_00: If not, watch out below.
• 4:50
  SPEAKER_00: It looked um changing topics here, moving on to South America.
• 4:54
  SPEAKER_00: It looks like the corn crop in Argentina is getting bigger.
• 4:57
  SPEAKER_00: Uh, that's the one they just got done harvesting, and that means that they will be a huge corn exporter for a longer period of time.
• 5:04
  SPEAKER_00: Argentina's corn exports for September look to be at least two times bigger than what they were last year.
• 5:11
  SPEAKER_00: They are pumping corn out.
• 5:14
  SPEAKER_00: Brazil is still running slow on corn exports.
• 5:17
  SPEAKER_00: As for Brazil, and we've talked about this the last several days, they are really dry on Monte Grosso.
• 5:23
  SPEAKER_00: And this may slow down the start to soybean planting.
• 5:27
  SPEAKER_00: Today it's it's concerning, but it's not a huge deal.
• 5:30
  SPEAKER_00: But here's how it relates to corn.
• 5:32
  SPEAKER_00: Monte Grosso is the biggest producer of their second corn crop.
• 5:36
  SPEAKER_00: That's the one planted after soybean harvest.
• 5:38
  SPEAKER_00: If the soybean crop is late, then second crop corn planting is late.
• 5:43
  SPEAKER_00: And that's a bad deal for those corn yields because of the seasonality of rain down there.
• 5:49
  SPEAKER_00: So we really need to watch the weather in Brazil in the next few weeks.
• 5:53
  SPEAKER_00: I still remain longer-term bullish corn, but not right here, right now.
• 5:57
  SPEAKER_00: We have run this market up way too high too fast.
• 6:01
  SPEAKER_00: And if we don't get some impressive trade deal with China, it's going to be hard to argue for higher corn prices anytime in the next couple of months.
• 6:10
  SPEAKER_00: All right, moving on to soybeans.
• 6:12
  SPEAKER_00: Soybean market is really getting knee-jerked around this week.
• 6:16
  SPEAKER_00: Number one, we got this China visit, and we don't know the outcome of that.
• 6:20
  SPEAKER_00: Number two, you got crushed plants in the Western Corn Belt that are running on fumes.
• 6:24
  SPEAKER_00: They have very few uh bean suppliers right now, and they really need new crop harvest to get crush rates back up, but rains keep coming and keeps harvest delayed.
• 6:35
  SPEAKER_00: Number three, crude oil is bouncing all over the place and pulling bean oil with it.
• 6:39
  SPEAKER_00: Number four, the market is watching weather, uh planting weather in Brazil.
• 6:42
  SPEAKER_00: We're too wet in Paraná, we're too dry in Mato Grosso and nearby states.
• 6:47
  SPEAKER_00: Not critical yet, as we've discussed, but it's not a good start to the planning season.
• 6:53
  SPEAKER_00: Um, netnet, I'm increasingly in the camp that longer-term rallies need to be sold in Chicago Beans.
• 7:03
  SPEAKER_00: Um, I've got uh page two today is um I've got some charts and maps of planning progress, uh normal planning progress in Brazil and where we're standing right now.
• 7:15
  SPEAKER_00: I've had several people the last uh few days uh email me asking questions about um Brazil and when they plan and what's normal and whatnot.
• 7:25
  SPEAKER_00: So I put that uh the entirety of page two is is charts and graphs on soybean planning progress in Brazil.
• 7:32
  SPEAKER_00: Uh and in the highlights, the 10,000-foot view is that Monta Grosso and Paraná plant first.
• 7:41
  SPEAKER_00: Um Rio Grande and Bahia are last, and the other states are somewhere in the middle.
• 7:47
  SPEAKER_00: So the two states everybody's watching right now is Paraná and Monta Grosso.
• 7:52
  SPEAKER_00: As far as weather, you've got continued rains um in Nebraska, Iowa, this week, next week.
• 8:00
  SPEAKER_00: Um, but really the focus is going to be, and and that's gonna impact crush rates and meal availability.
• 8:07
  SPEAKER_00: Okay.
• 8:08
  SPEAKER_00: Uh let's not not forget that point.
• 8:13
  SPEAKER_00: But the big highlight on weather is South America, and it looks like the weather is hopefully transitioning next week.
• 8:21
  SPEAKER_00: Now, again, this is day, you know, eight, nine, ten, okay, from now.
• 8:27
  SPEAKER_00: So late next week, it looks like better rains are coming into the Green Belt in Argentina and potentially into Mato Grosso.
• 8:35
  SPEAKER_00: So, but again, that's a week out, and that weather forecast is going to change a hundred times before we get there.
• 8:40
  SPEAKER_00: So that's it for today.
• 8:42
  SPEAKER_00: Thanks for listening.
• 8:43
  SPEAKER_00: We'll be back tomorrow.