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Transcript

Daily Market Podcast Jul 22 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: Chris Myers from the M6 Capital Management with our daily market letter on Wednesday, July 22nd.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is up six and a quarter at 481 and a quarter.
• 0:12
  SPEAKER_00: November beans are up six and a half at 1229 and a quarter.
• 0:16
  SPEAKER_00: September crude oil is up 280 at 87.10.
• 0:21
  SPEAKER_00: As far as corn and beans this morning, we really have a mixed bag.
• 0:26
  SPEAKER_00: Um, and the market's being pulled in all different directions this morning.
• 0:30
  SPEAKER_00: First off, let's start with corn.
• 0:32
  SPEAKER_00: Weather forecasts have continued to be dry in the heart of the corn belt, but this morning the forecast looked like we are going to get more heat coming in the corn belt.
• 0:42
  SPEAKER_00: Uh, so the CBFT corn market is really at a conundrum.
• 0:47
  SPEAKER_00: On one side, we have current crop condition ratings that are better than average, and thus far, it looks like we have a good U.S.
• 0:55
  SPEAKER_00: corn crop in total.
• 0:58
  SPEAKER_00: On the other side, we have this forecast falling, calling for detrimental weather that could lower crop expectations.
• 1:07
  SPEAKER_00: Um, so the market's uh trying to figure out what to do with that.
• 1:12
  SPEAKER_00: Also, as we check around with producers, we're getting um various bad reports, crop reports out of Kansas, Nebraska, South Dakota, and North Dakota.
• 1:22
  SPEAKER_00: But guys in the next series of states over Minnesota, Iowa, Wisconsin, and even most of Missouri are reporting really good crops.
• 1:32
  SPEAKER_00: Then you keep going to the east, Illinois, uh, Indiana, Ohio is kind of a mixed bag.
• 1:38
  SPEAKER_00: Most people are okay, plus or minus.
• 1:41
  SPEAKER_00: You keep moving to the east, uh, and you get in that dry corridor of North Carolina, South Carolina, Georgia, and crops over there are just bad.
• 1:51
  SPEAKER_00: So as we mentioned yesterday, the size of the U.S.
• 1:56
  SPEAKER_00: corn crop is by far the biggest question mark for the market to try to solve right now.
• 2:00
  SPEAKER_00: So, with this current weather forecast, temperatures getting hotter, we remain quite firm this morning.
• 2:07
  SPEAKER_00: But I'm not sure we can really rally this thing a whole lot right now until we get another week or so down the road and we see if this hot, dry weather actually occurs.
• 2:18
  SPEAKER_00: This is a weather forecast.
• 2:20
  SPEAKER_00: We've all seen those things change a hundred times.
• 2:22
  SPEAKER_00: Um but do we actually get this hot dry weather?
• 2:28
  SPEAKER_00: And do U.S.
• 2:29
  SPEAKER_00: corn crop ratings actually decline next week and the week after.
• 2:33
  SPEAKER_00: Longer term, I still remain quite bullish CBOT corn, um, but that's more from the demand side.
• 2:39
  SPEAKER_00: Uh, I just believe right now we may not may actually need to see more damage to the U.S.
• 2:45
  SPEAKER_00: corn crop before we rally too much more right now.
• 2:49
  SPEAKER_00: Moving on to beans, um the CBOT soybeans uh are also being pulled in different directions.
• 2:56
  SPEAKER_00: Your current crop conditions in the U.S.
• 2:59
  SPEAKER_00: imply a very good U.S.
• 3:01
  SPEAKER_00: bean yield.
• 3:02
  SPEAKER_00: But then we have this weather issue out in front of us.
• 3:06
  SPEAKER_00: Uh, and if you take a good bean crop right now with increased bean acres, that calculates out to be a record large U.S.
• 3:15
  SPEAKER_00: bean crop uh this year.
• 3:17
  SPEAKER_00: And export demand is decent.
• 3:20
  SPEAKER_00: U.S.
• 3:20
  SPEAKER_00: crush rates continue to be record large.
• 3:22
  SPEAKER_00: So combined, we have a record bean crop and record demand.
• 3:28
  SPEAKER_00: On the product side, bean oil continues to be firm with continued strength in crude oil and energy markets.
• 3:35
  SPEAKER_00: So meatle ends up being the wild card.
• 3:38
  SPEAKER_00: We've uh long discussed questions we have about slow farmer selling in Argentina, and would that slow down Argentina crush and slow down Argentina meal exports?
• 3:48
  SPEAKER_00: And eventually, does that mean the U.S.
• 3:49
  SPEAKER_00: would get more meal export business?
• 3:51
  SPEAKER_00: Well, that's still a question mark, okay?
• 3:55
  SPEAKER_00: But this morning um or this week, we have a similar problem in Brazil also.
• 4:01
  SPEAKER_00: Soybean export basis has firmed in Brazil, and exporters are willing to pay more than the crushers can pay for soybeans in Brazil.
• 4:11
  SPEAKER_00: So as of this morning, you got crush margins over large parts of interior Brazil that are negative.
• 4:18
  SPEAKER_00: Uh so we have some crushers there that are reportedly slowing down crush, and they may even halt operations in the not too distant future.
• 4:29
  SPEAKER_00: This is a big deal because of the last several months, Brazil has been a massive meal exporter.
• 4:35
  SPEAKER_00: So if Brazil slows the crush rate down and slows down meal exports, could that mean that more meal exports flow back to the U.S.?
• 4:44
  SPEAKER_00: Maybe.
• 4:45
  SPEAKER_00: So this is keeping the CBOT meal market firm here.
• 4:50
  SPEAKER_00: Um more meal exports have not shown up in the U.S.
• 4:55
  SPEAKER_00: yet.
• 4:56
  SPEAKER_00: But the threat of that is bullish meal.
• 5:00
  SPEAKER_00: All of this keeps, you know, firm bean oil, firm meal, it all keeps big U.S.
• 5:05
  SPEAKER_00: crush margins.
• 5:07
  SPEAKER_00: So kind of hard to take a bean market down when crush margins are so big.
• 5:12
  SPEAKER_00: So CBOT beans remain firm.
• 5:16
  SPEAKER_00: Um, I've got some price uh chart at the bottom of page one today that is comparing U.S.
• 5:20
  SPEAKER_00: Gulf to soybean export prices.
• 5:23
  SPEAKER_00: Um, the U.S.
• 5:24
  SPEAKER_00: Gulf is a little bit cheaper, CEPAG Nov D'Ah, but Brazil has got a cheaper freight rate going to Europe and Asia.
• 5:32
  SPEAKER_00: So landed prices, Brazil actually still wins just barely.
• 5:36
  SPEAKER_00: Um, but please note um Brazilian prices in February.
• 5:41
  SPEAKER_00: They are uh what$12.70 a bushel and versus US Gulf is about$13.50 a bushel.
• 5:52
  SPEAKER_00: So, you know, that's obviously their new crop price.
• 5:56
  SPEAKER_00: Um, and that's a market calculating that they're going to expand 3-4% on the soybean area.
• 6:01
  SPEAKER_00: So um, so there's that.
• 6:04
  SPEAKER_00: Um moving on to whether, you know, the 1 to 5, 6 to 10, even the 11 to 15 is basically uh below normal precip uh in the plains and all across the corn belt.
• 6:17
  SPEAKER_00: We've got some smoking hot temperatures coming in Saturday, Sunday, Monday in the plain states with uh some temperatures in the 110s to 115 range uh in Nebraska and South Dakota.
• 6:32
  SPEAKER_00: Uh the South Dakota crops are just gonna burn up with this.
• 6:36
  SPEAKER_00: They they've just had a week of hot temperatures.
• 6:39
  SPEAKER_00: Um and uh then I've got some charts for temperatures for the 6 to 10 and 8 to 14 day time period, and we've got normal to well above normal.
• 6:51
  SPEAKER_00: Uh really well above normal temperatures uh for this foreseeable future.
• 6:56
  SPEAKER_00: So um now it just uh we need to see does the temperature forecast play out or not.
• 7:04
  SPEAKER_00: So that's it for today.
• 7:05
  SPEAKER_00: Uh thanks for listening.
• 7:06
  SPEAKER_00: We'll be back tomorrow.