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Daily Market Podcast Oct 28 · 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, October 28th.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is up three and a quarter at 451 and three quarters.
• 0:11
  SPEAKER_00: November beans are up four and a quarter at twelve thirty-three and a half.
• 0:16
  SPEAKER_00: December meal is down thirty cents, and December crude is up a dollar eighty.
• 0:20
  SPEAKER_00: We're at 101.70 this morning.
• 0:23
  SPEAKER_00: Excuse me.
• 0:25
  SPEAKER_00: With a depreciation in Brazilian currency this week, we have seen export corn prices in Brazil decline.
• 0:34
  SPEAKER_00: So yet again, Brazil and Argentina corn are both well under U.S.
• 0:41
  SPEAKER_00: corn, and our export potential for corn out of the U.S.
• 0:45
  SPEAKER_00: does not look very good.
• 0:47
  SPEAKER_00: However, U.S.
• 0:48
  SPEAKER_00: uh ethanol margins are big.
• 0:50
  SPEAKER_00: Corn prices are declining, gasoline prices remain high.
• 0:54
  SPEAKER_00: I'm not sure that we can see ethanol production really pick up very much because we're already running at pretty high rates.
• 1:00
  SPEAKER_00: But this does keep ethanol production big for a long time.
• 1:04
  SPEAKER_00: It keeps it from going down, that's for sure.
• 1:06
  SPEAKER_00: Meanwhile, speculators continue to liquidate their loans in CBOT corn.
• 1:11
  SPEAKER_00: Um, we've been reporting on this before, but when speculators have a big position in corn and they start to get out, historically they take it all the way to zero.
• 1:20
  SPEAKER_00: They get out of everything.
• 1:22
  SPEAKER_00: So we could easily see another two or three weeks of selling pressure in CBOT corn.
• 1:27
  SPEAKER_00: U.S.
• 1:28
  SPEAKER_00: and global corn supplies remain big.
• 1:31
  SPEAKER_00: Speculators are selling.
• 1:32
  SPEAKER_00: The path of least resistance continues to be lower.
• 1:36
  SPEAKER_00: Excuse me.
• 1:38
  SPEAKER_00: On the bottom of page one, I have two charts.
• 1:41
  SPEAKER_00: I have um relating to soybeans.
• 1:43
  SPEAKER_00: I have a chart of CBOT soybeans calculated into Brazilian Reals, and I have a chart of Brazilian soybean production with our expectations for 27.
• 1:55
  SPEAKER_00: Following Lula's win in the Brazilian presidential election on Sunday, Brazil's currency lost quite a bit of value, which means farmers in Brazil get more reales for their crops.
• 2:09
  SPEAKER_00: But does this really matter?
• 2:10
  SPEAKER_00: A weaker currency also means that they pay more for imported inputs.
• 2:16
  SPEAKER_00: Well, most of their fertilizer has already been imported and booked, and fuel is mostly produced domestically.
• 2:24
  SPEAKER_00: So a change in currency at this date impacts the sales price of soybeans much, much more than the price of inputs.
• 2:34
  SPEAKER_00: If you look at the chart on the bottom of page one, soybean prices now are currently the highest that they have been in Reales since 2023.
• 2:44
  SPEAKER_00: And if we go out and look out in the future at May, if you use the May CBOT price and calculate that into Reales, it is even higher.
• 2:55
  SPEAKER_00: And May is the futures month that most of Brazil's crop is priced against.
• 3:01
  SPEAKER_00: Before this change in currency, Brazil's soybean area was expected to increase 1.5%.
• 3:08
  SPEAKER_00: Today, we should expect planted area to increase even more.
• 3:12
  SPEAKER_00: And soybean planted area, uh, soybean planting pace is already ahead of normal in almost all areas in Brazil except uh Paraná.
• 3:24
  SPEAKER_00: So this certainly allows for more soybean planting to occur.
• 3:28
  SPEAKER_00: So once again, we are looking at a record large production coming in Brazil.
• 3:34
  SPEAKER_00: And as far as Argentina, we expect production levels to be right at the record level that they produced two years ago.
• 3:41
  SPEAKER_00: And this follows a record large crop in the U.S.
• 3:44
  SPEAKER_00: The world will have plentiful soybean supplies.
• 3:48
  SPEAKER_00: Crush rates in Brazil and Argentina are big right now and should continue to be big.
• 3:54
  SPEAKER_00: Um, they have plenty of beans to export and plenty of meal to export with these big crush rates.
• 4:00
  SPEAKER_00: So until we have some hot, dry weather that hits South America, these big crops will limit the upside to CBOT soybeans.
• 4:11
  SPEAKER_00: And on down the road, if these crops are realized, by the time we get to March, April, May time period of 2027, we could easily see CBOT soybeans under$12.
• 4:26
  SPEAKER_00: As far as weather goes, um, we've got some weather coming into the plains in the western cornbelt the next several days.
• 4:36
  SPEAKER_00: Eastern Corn Belt remains mostly open, and the northern part of the corn belt is mostly open.
• 4:41
  SPEAKER_00: And then next week we've got light scattered rains uh pretty much covering the whole belt.
• 4:46
  SPEAKER_00: But harvest this week really should uh should be blowing and going in most areas.
• 4:52
  SPEAKER_00: South America, uh let's cover Argentina first, and then we'll look at Brazil.
• 4:58
  SPEAKER_00: In Argentina, they've got light scattered rains this week and next week.
• 5:03
  SPEAKER_00: Planning pace for corn is well ahead of normal.
• 5:06
  SPEAKER_00: Most air bodies should have some pretty decent moisture uh in Argentina.
• 5:11
  SPEAKER_00: As far as Brazil goes, um, moisture has been really good in most areas.
• 5:16
  SPEAKER_00: The exception is Paraná, which has been too wet.
• 5:20
  SPEAKER_00: They've got somewhat of a break the next four or five days.
• 5:23
  SPEAKER_00: So planning should be able to pick back up, and then we return to uh heavier rains next week, also.
• 5:30
  SPEAKER_00: So for right now, it looks like South America is in okay shape for weather.
• 5:35
  SPEAKER_00: That's it for today.
• 5:36
  SPEAKER_00: Thanks for listening.
• 5:37
  SPEAKER_00: We'll be back tomorrow.