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Daily Market Podcast Sep 16 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:00
  SPEAKER_00: This is Chris Myers of William Six Capital Management with our daily market letter on Wednesday morning, September 16th.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is down one and a half at 534 and a quarter.
• 0:12
  SPEAKER_00: November soybeans are up seven and a quarter at 1326.
• 0:16
  SPEAKER_00: December meal is up 30 cents at 365.70 this morning.
• 0:21
  SPEAKER_00: And October crude is down 280 at 103 even.
• 0:26
  SPEAKER_00: So before we get into corn and beans, we really need to talk about this speculator money and flows.
• 0:33
  SPEAKER_00: Okay.
• 0:34
  SPEAKER_00: We are in uncharted waters.
• 0:37
  SPEAKER_00: Speculators continue their buying spree in CBOT grains like there is just no tomorrow.
• 0:43
  SPEAKER_00: They had record large long positions two weeks ago, and they continue buying more.
• 0:50
  SPEAKER_00: Historically, there have been two main reasons that we see huge buying from these large investors, speculators, whatever you want to call them, but seldom have these two reasons ever occurred at the same time.
• 1:04
  SPEAKER_00: Number one is we have a scenario where supply-demand in corn or beans or whatever suggests tighter supplies are coming.
• 1:15
  SPEAKER_00: And then number two, the second scenario is a big inflation story suggesting that overall commodity prices are going higher.
• 1:25
  SPEAKER_00: Today we have both scenarios occurring at the same time, which is very uncommon.
• 1:32
  SPEAKER_00: So it becomes very difficult to estimate how much more buying will occur or how long this will go on for.
• 3:01
  SPEAKER_00: Argentina is pumping out record volumes of corn, and U.S.
• 3:05
  SPEAKER_00: corn exports remained very strong.
• 3:09
  SPEAKER_00: I find it very interesting that in early August, U.S.
• 3:13
  SPEAKER_00: corn was cheaper than Brazil and around the same price as Argentina.
• 3:17
  SPEAKER_00: And we were doing big volume of export business.
• 3:21
  SPEAKER_00: After this last rally, U.S.
• 3:24
  SPEAKER_00: corn has been the most expensive corn in the world for three weeks in a row now.
• 3:30
  SPEAKER_00: And yet, U.S.
• 3:32
  SPEAKER_00: corn export sales continue to be huge.
• 3:34
  SPEAKER_00: Export shipments, actual shipments continue to be big.
• 3:39
  SPEAKER_00: And corn, with this corn and barley and wheat exports not flowing out of Russia or Ukraine, this keeps U.S.
• 3:49
  SPEAKER_00: corn export business bigger than it should be right now.
• 3:53
  SPEAKER_00: If, for whatever reason, grain exports returned to the Black Sea, if Russia and Ukraine, you know, kiss and make up for whatever reason, then we could see U.S.
• 4:05
  SPEAKER_00: corn export business slow down quite a bit very quickly.
• 4:10
  SPEAKER_00: As far as this U.S.
• 4:11
  SPEAKER_00: corn crop goes, we still lean towards a 175, 176 bushel per acre U.S.
• 4:17
  SPEAKER_00: corn yield, which would certainly be very bullish for next spring and summer.
• 4:23
  SPEAKER_00: And along those lines, each year we monitor yield trials from multiple seed companies and universities across the country.
• 4:32
  SPEAKER_00: And those yield reports are beginning to pick up.
• 4:35
  SPEAKER_00: So far, we don't have enough data to really draw any conclusions, but when we do, we will certainly share those thoughts.
• 4:42
  SPEAKER_00: For now, I'm still in the camp that CBOT corn could set back a little bit during harvest.
• 4:50
  SPEAKER_00: Again, it depends on the speculator buying that we, you know, we don't know what they're going to do.
• 4:56
  SPEAKER_00: And so far, that speculated buying has really kept us from breaking very much.
• 5:01
  SPEAKER_00: And we also have this Trump Z meeting next week that may or may not end with more Chinese grain buying.
• 5:09
  SPEAKER_00: So we got that to look forward to.
• 5:12
  SPEAKER_00: Um, as far as soybean news, the soybean rally yesterday was hugely driven by meal.
• 5:19
  SPEAKER_00: CBOT meal surged to new contract ties following a month's report out of NOPA, that's the National Oilseed Processors Association in the U.S.
• 5:28
  SPEAKER_00: And it showed that August crush was not as big as expected.
• 5:33
  SPEAKER_00: So, what does this mean?
• 5:35
  SPEAKER_00: This means that domestic meal supplies are a little bit tighter than what the market was looking for.
• 5:42
  SPEAKER_00: And we also have several crushers in Iowa that are slowing down right now.
• 5:46
  SPEAKER_00: They're waiting for new crop beans uh coming in from the farmer.
• 5:50
  SPEAKER_00: And with this big rain coming through, that's not going to happen anytime soon.
• 5:55
  SPEAKER_00: Um meanwhile, in Brazil, CANAP, which is the USD of Brazil, they issued their monthly report yesterday showing soybean plantings are up, are expected to be up 1.4% from last year.
• 6:11
  SPEAKER_00: Soybean plantings in Argentina and Paraguay are expected to be higher also.
• 6:16
  SPEAKER_00: Combined, South America soybean planted area should be record large.
• 6:21
  SPEAKER_00: And if yields are okay, then next spring and summer, the world once again has plenty of soybeans.
• 6:28
  SPEAKER_00: But none of that matters to speculators today.
• 6:31
  SPEAKER_00: They just keep buying more and more and more CBOT soybeans.
• 6:37
  SPEAKER_00: Moving on to weather, um, we got this big rain coming through parts of Iowa, Minnesota, Wisconsin next several days.
• 6:46
  SPEAKER_00: And then next week, uh the rains, we got light-scattered rains over the central and western part of the Corn Belt, and pretty decent rains in the east.
• 6:57
  SPEAKER_00: We do still have some of these hot temperatures, these smoking hot temperatures are lingering in southern areas.
• 7:04
  SPEAKER_00: Texas, Oklahoma, all the way across to Mississippi and Tennessee.
• 7:08
  SPEAKER_00: Um, and looks like that's gonna last for several more days.
• 7:12
  SPEAKER_00: And then we at the bottom of page two, I've got a chart of Brazil, a map of Brazil, rather.
• 7:18
  SPEAKER_00: We really need to be watching this because the two areas that should be planting soybeans uh beginning right now in Brazil is Paraná, um in southern part of Brazil and Mato Grosso in central Brazil.
• 7:34
  SPEAKER_00: Well, Mato Grosso is bone dry, and farmers there will wait for their seasonal range to pick up, which does not look like it's gonna happen anytime soon.
• 7:44
  SPEAKER_00: And then Paraná, which is just dripping wet, they are getting hosed, and and they have been wet for several weeks, and the forecast has got them getting another two to four inches of rain uh in the next week or so.
• 7:59
  SPEAKER_00: So farmers in Paraná uh are gonna they're gonna be slow going getting started.
• 8:05
  SPEAKER_00: So, not a major problem today, but if we're still sitting with the same situation two weeks from now, the market's gonna really start paying attention.
• 8:14
  SPEAKER_00: So, something to watch.
• 8:16
  SPEAKER_00: Thanks for listening today.
• 8:17
  SPEAKER_00: That's it.
• 8:18
  SPEAKER_00: We'll be back tomorrow.