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Daily Market Podcast Nov 5 · 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 Thursday morning, November 5th.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is up 3.5 at 447 and 3 quarters.
• 0:11
  SPEAKER_00: January soybeans are up 6.25 at$11.99.5.
• 0:15
  SPEAKER_00: December meal is up$2.80, and D Summer Crude is up 80 cents at 88.90.
• 0:21
  SPEAKER_00: It's had a heck of a break this week.
• 0:24
  SPEAKER_00: Um, this morning I'll talk about longer-term thoughts.
• 0:27
  SPEAKER_00: There's not a whole lot new going on this morning as far as the daily news flow for corn and beans.
• 0:34
  SPEAKER_00: So I thought this would be a good time to go through some longer-term thoughts for corn and soybeans.
• 0:38
  SPEAKER_00: We all need to know what the key drivers will be and what we need to be looking out for.
• 0:45
  SPEAKER_00: As far as corn, um, let's assume, this is the long-term outlook for corn, let's assume that the USDA gives us a 181, 182 type corn yield next week.
• 0:59
  SPEAKER_00: That would be the second largest corn crop in the United States ever, behind only last year.
• 1:06
  SPEAKER_00: And U.S.
• 1:06
  SPEAKER_00: corn exports are not doing good at all.
• 1:09
  SPEAKER_00: We're only two months into the September-August crop year, but outstanding U.S.
• 1:16
  SPEAKER_00: corn export sales are pathetic at 13 million tons.
• 1:20
  SPEAKER_00: That is versus 25 million a year ago and 19 million the year before that.
• 1:27
  SPEAKER_00: There's simply too much corn around the world and other origins that is cheaper.
• 1:32
  SPEAKER_00: Longer term, U.S.
• 1:34
  SPEAKER_00: exports will be driven by crops in South America.
• 1:37
  SPEAKER_00: If they have big crops that we expect, then U.S.
• 1:41
  SPEAKER_00: corn exports will be stinko well into next summer, maybe longer.
• 1:45
  SPEAKER_00: So a monster corn crop in the U.S., poor exports right now, very large, maybe record large, corn ex corn crops coming in South America, and the potential for poor exports for many, many months to come.
• 1:58
  SPEAKER_00: That points to lower CBOT corn prices ahead.
• 2:02
  SPEAKER_00: Likely$4, maybe$425, maybe even lower than that.
• 2:07
  SPEAKER_00: But that assumes South America makes a big corn crop.
• 2:11
  SPEAKER_00: And today that's a huge assumption.
• 2:13
  SPEAKER_00: Corn planting thus far has gone really good, but we have several months of growing season ahead of us yet.
• 2:19
  SPEAKER_00: And the forecast, if we get a forecast for two, three weeks of hot, dry weather in South America, especially in Argentina, that would turn the CBOT corn market higher in a heartbeat.
• 2:33
  SPEAKER_00: CBOT corn just broke a dollar in six weeks.
• 2:37
  SPEAKER_00: The next 50 cents down may take a whole lot longer.
• 2:41
  SPEAKER_00: The longer-term outlook for CBOT soybeans is a little bit more complicated.
• 2:46
  SPEAKER_00: If we assume that the U.S.
• 2:47
  SPEAKER_00: soybean yield is at least 53 bushels per acre, then we will have the largest soybean crop ever produced in the United States.
• 2:56
  SPEAKER_00: U.S.
• 2:57
  SPEAKER_00: crush is expected to be big to supply bean oil to the growing renewable diesel industry.
• 3:03
  SPEAKER_00: And that means crush plants produce a record amount of soybean meal.
• 3:08
  unknown: U.S.
• 3:08
  SPEAKER_00: chicken numbers are up slightly from last year, hog numbers are getting smaller, dairy numbers and milk production are both up slightly from last year.
• 3:16
  SPEAKER_00: So U.S.
• 3:17
  SPEAKER_00: domestic meal demand is up a little, not a lot.
• 3:21
  SPEAKER_00: And with big bean crops in South America, plenty of crush capacity there, they should dominate global meal export trade.
• 3:30
  SPEAKER_00: U.S.
• 3:31
  SPEAKER_00: meal exports should go down quite a bit.
• 3:34
  SPEAKER_00: The point is this crushers will struggle to get rid of all the meal they produce, especially when we get in 2027.
• 3:43
  SPEAKER_00: This means lower prices to find a home for all the meal.
• 3:47
  SPEAKER_00: As of right now, Brazilian soybean air is expected to be up 2%.
• 3:51
  SPEAKER_00: Argentine soybean air looks to be unchanged, but trend yields would put a record large crop in both countries.
• 3:58
  SPEAKER_00: If South America makes their crops, the world should have plenty of beans and plenty of meal.
• 4:07
  SPEAKER_00: And with all the cheap used cooking oil and excess of palm oil, there is no shortage of global veg oils to feed into biofuels.
• 4:16
  SPEAKER_00: So we seem to be headed towards lower meal prices and lower oil prices in the United States.
• 4:23
  SPEAKER_00: That means crush margins are going to get smaller.
• 4:26
  SPEAKER_00: And lower crush margins and excess of beans in South America screams that lower U.S.
• 4:33
  SPEAKER_00: meal prices are coming also.
• 4:36
  SPEAKER_00: But a huge portion of this thought process hinges on making crops in South America.
• 4:43
  SPEAKER_00: Brazil is the market that everybody will watch closely.
• 4:46
  SPEAKER_00: If weather turns hot and dry in Brazil, then CBAT soybean market will race higher.
• 4:53
  SPEAKER_00: So, like corn, the road to lower prices could be a very bumpy one.
• 4:58
  SPEAKER_00: As far as weather goes, the U.S.
• 5:00
  SPEAKER_00: weather forecast really has not changed a whole lot.
• 5:02
  SPEAKER_00: We just had a wet period uh across the U.S.
• 5:06
  SPEAKER_00: Corn Belt.
• 5:06
  SPEAKER_00: It looks like the next really next eight, nine, ten days are going to be wide open.
• 5:12
  SPEAKER_00: It'll take several days for the corn belt to dry out, but then it looks like next week we should be blowing and going to finish up harvest.
• 5:20
  SPEAKER_00: In South America, still more of the same.
• 5:22
  SPEAKER_00: Most everybody's got decent moisture.
• 5:24
  SPEAKER_00: Paraná in southern Brazil is still too wet.
• 5:27
  SPEAKER_00: I would like to see a drier area there, drier weather there.
• 5:30
  SPEAKER_00: But otherwise, South America is doing really good.
• 5:33
  SPEAKER_00: That's it for today.
• 5:34
  SPEAKER_00: Thanks for listening.
• 5:35
  SPEAKER_00: We'll be back tomorrow.