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Transcript

Daily Market Podcast Jul 31 · 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 Friday, July 31st.
• 0:06
  SPEAKER_00: Walking in this morning, we got December corn down three cents at 465.5.
• 0:11
  SPEAKER_00: We got November beans down two and a half at 11.86 and a quarter.
• 0:15
  SPEAKER_00: December meal is off 130 at 312.7.
• 0:20
  SPEAKER_00: And September crude is up$1.50 at$85.10.
• 0:25
  SPEAKER_00: First corn news this morning.
• 0:26
  SPEAKER_00: The current storm moving across the corn belt may be the single most important rain event that we've had this growing season.
• 0:33
  SPEAKER_00: Many states are needing rain, and this storm is supposed to be dropping one to two inches across Minnesota, Iowa, Illinois, Indiana, Ohio.
• 0:42
  SPEAKER_00: And obviously, corn is in its highest water use phase right now.
• 0:46
  SPEAKER_00: Um, so this rain makes a huge difference.
• 0:50
  SPEAKER_00: Weekly U.S.
• 0:51
  SPEAKER_00: corn export sales yesterday were huge at 1.4 million tons.
• 0:55
  SPEAKER_00: Uh that's sales for one week.
• 0:58
  SPEAKER_00: This uh is 40% higher than export sales for the same week a year ago.
• 1:06
  SPEAKER_00: Global corn demand remains big.
• 1:09
  SPEAKER_00: So by default, U.S.
• 1:11
  SPEAKER_00: uh export demand for corn remains big.
• 1:14
  SPEAKER_00: We've discussed the top five global corn exporters and how we have limited export flows flowing out of three of them Russia, Ukraine, and Brazil.
• 1:22
  SPEAKER_00: So that leaves so much more pressure on the U.S.
• 1:24
  SPEAKER_00: and Argentina to get it all done.
• 1:26
  SPEAKER_00: Well, there is talk, uh, continued talk in the grain industry in Argentina that uh their president Malay is considering lowering grain export taxes again.
• 1:39
  SPEAKER_00: So that means that their farmers in Argentina are going to slow down grain marketing, whether it is wheat or corn or beans or sorghum or whatever, they're gonna slow down sales to whatever degree they can on all grains because they're just gonna be putting more money in their own pocket if they don't have to pay the export taxes.
• 2:00
  SPEAKER_00: So again, everything, and I mean everything, screams that U.S.
• 2:05
  SPEAKER_00: corn export demand will be record large for a long, long time coming.
• 2:10
  SPEAKER_00: That brings us full circle back around to the U.S.
• 2:13
  SPEAKER_00: crop.
• 2:14
  SPEAKER_00: This current system going across, and I've got a map of the radar on the bottom of page one.
• 2:21
  SPEAKER_00: This current system coming across, it better deliver the rain.
• 2:25
  SPEAKER_00: And this crop needs rains to come every three, four days from now on.
• 2:30
  SPEAKER_00: But that's not really in the forecast this morning.
• 2:33
  SPEAKER_00: Um we've already lost some U.S.
• 2:36
  SPEAKER_00: corn crop, and we cannot afford to lose any more.
• 2:39
  SPEAKER_00: I remain firmly in the camp that longer term CBFT corn has much more upside than downside.
• 2:45
  SPEAKER_00: But the here and now, the next one to one and a half, two weeks, uh particularly until we get to the U.S.
• 2:52
  SPEAKER_00: uh crop report in August, that's uh we're just gonna chop around and probably not do a whole lot.
• 2:58
  SPEAKER_00: Longer term, I'm still bullish and can easily be super bullish.
• 3:02
  SPEAKER_00: Moving on to soybeans, clearly the same rain event benefits beans also, but soybeans is in a little different boat.
• 3:08
  SPEAKER_00: Soybeans can benefit from rains later into the growing season than corn can, obviously.
• 3:13
  SPEAKER_00: And less of the soybean crop is located in the far western corn belt and plain states compared to corn.
• 3:20
  SPEAKER_00: China continues to buy more U.S.
• 3:22
  SPEAKER_00: soybeans day after day.
• 3:23
  SPEAKER_00: They bought some yesterday.
• 3:24
  SPEAKER_00: This seems to be a kind of a regular thing almost every day now.
• 3:27
  SPEAKER_00: And we're also selling more and more soybeans for export to the rest of the world, also.
• 3:32
  SPEAKER_00: Current U.S.
• 3:34
  SPEAKER_00: outstanding soybean export sales, that's sales that we have sold, but we hadn't shipped, is up 35% from the same date a year ago.
• 3:44
  SPEAKER_00: So decent demand, um, decent export demand.
• 3:49
  SPEAKER_00: CBOT meal has sold off some$16,$17 from the highs last week, and that may be enough for now, especially with the potential for slower crush in both Brazil and Argentina.
• 4:00
  SPEAKER_00: Soybean meal basis has firmed this week in both countries, Brazil and Argentina, pointing towards more U.S.
• 4:07
  SPEAKER_00: meal export business coming.
• 4:09
  SPEAKER_00: I remain in the camp that we have too many moving parts in soybeans right now, including several big ones that we just quite frankly have no way to predict, such as the price of crude oil and the upcoming September meeting between Trump and Z.
• 4:25
  SPEAKER_00: U.S.
• 4:25
  SPEAKER_00: soybean demand is big, and I just don't see CBOT soybeans dropping much more until we get further down the calendar and we know more crop, more information on crops, crude, China, meal export demand.
• 4:38
  SPEAKER_00: We've we just need to get further down the calendar and learn more.
• 4:43
  SPEAKER_00: Uh so we likely, you know, kind of the same boat as corn, we kind of chop around and do nothing, particularly until we get to the August Crop Report on August 12th.
• 4:51
  SPEAKER_00: Moving on to cattle news.
• 4:53
  SPEAKER_00: Um let's start cattle at the 60,000-foot view, and then we'll kind of narrow into more specifics.
• 4:59
  SPEAKER_00: Last Friday, USDA gave us their biannual cattle inventory report.
• 5:03
  SPEAKER_00: Uh, and I've got two charts on the bottom of page two relating to that.
• 5:08
  SPEAKER_00: And one chart is on the beef cow numbers.
• 5:11
  SPEAKER_00: They continue to decline down a little bit, down 200,000 from last year.
• 5:18
  SPEAKER_00: And that puts July 1 beef cow numbers in the U.S.
• 5:22
  SPEAKER_00: are now the smallest since the early 1960s.
• 5:25
  SPEAKER_00: And to follow right along with that, um, your calf crop in 2026 is also expected to be the smallest number for the same time period since the 60s.
• 5:36
  SPEAKER_00: So, longer term, that keeps U.S.
• 5:39
  SPEAKER_00: cattle numbers small for a long, long time.
• 5:43
  SPEAKER_00: Given the cycle of cattle, we need to obviously start holding heifers, then breed them, then have more calves, and then grow them out on pasture, and then eventually get them in the philosophy.
• 5:52
  SPEAKER_00: And that obviously takes time.
• 5:54
  SPEAKER_00: Today, we are just beginning to see a few ranchers starting to hold heifers.
• 5:59
  SPEAKER_00: The combination of the high value of that young heifer plus high operating cost, um, you know, fuel fertilizer, uh, labor cost, you name it, all of that combined has made growing this herd this year a very difficult thing.
• 6:16
  SPEAKER_00: Um so the end result is that cattle numbers and feedlots stay are they very likely see no material growth.
• 6:24
  SPEAKER_00: They stay flat, um at least until probably mid-2028 at the earliest.
• 6:31
  SPEAKER_00: So two years from now.
• 6:34
  SPEAKER_00: So obviously, cattle and feed numbers in Mexico are growing.
• 6:39
  SPEAKER_00: This closed border has forever changed that dynamic.
• 6:43
  SPEAKER_00: What we just did was create a beef competitor for us longer term.
• 6:49
  SPEAKER_00: And uh, you know, their production costs are obviously less than what they are in the U.S., and eventually that's gonna come back to haunt us.
• 6:56
  SPEAKER_00: Uh, we're already seeing quite a bit more uh Mexican beef flowing into the U.S.
• 7:00
  SPEAKER_00: at prices well below our beef.
• 7:04
  SPEAKER_00: So let's move to the here and now.
• 7:06
  SPEAKER_00: We still have way too many speculators that are trading our cattle markets.
• 7:09
  SPEAKER_00: I don't like it.
• 7:10
  SPEAKER_00: I'd like I just assume they'd be gone, but that's the world we live in.
• 7:14
  SPEAKER_00: And the impact of those speculators is wild moves, like the limit down that we had on Monday in feeders, only to be back trading where we started from three days later.
• 7:24
  SPEAKER_00: And the trading range in CME live cattle in the last several weeks is averaging$4 high to low per day.
• 7:34
  SPEAKER_00: That is insane.
• 7:36
  SPEAKER_00: That's ridiculous.
• 7:38
  SPEAKER_00: And to quote a long-term cattle trader who wrote in a note yesterday, uh, and and this certainly relates to our cattle markets, if the trading on Monday was created by, in large part, by the best artificial intelligence that money can buy, then the human race doesn't really need to worry about a machine-created takeover anytime soon.
• 8:05
  SPEAKER_00: And I would absolutely agree.
• 8:07
  SPEAKER_00: Meanwhile, cattle feeders need to sell cattle.
• 8:10
  SPEAKER_00: They got a lot of cattle that are fat and need to go.
• 8:12
  SPEAKER_00: And in the near term, the next three, four weeks, cash markets could easily trade lower, and this ugliness is likely not over with yet.
• 8:21
  SPEAKER_00: Moving on to weather, uh, as we discussed, we got this uh quite significant rain event coming uh the next three days across the corn belt.
• 8:30
  SPEAKER_00: Next week, we've got some light-scattered rains, mostly less than an inch.
• 8:36
  SPEAKER_00: And then I've put the six to ten and eight to fourteen day uh temperature and pre-temperature and precip outlooks in there.
• 8:44
  SPEAKER_00: And you can see we remain well above normal temperatures and normal ish on precip, uh, but the plain states and the western core belt still remain short of moisture.
• 8:55
  SPEAKER_00: So, again, this is not helping crops, particularly not helping the corn crop longer term.
• 9:01
  SPEAKER_00: That's it for today.
• 9:03
  SPEAKER_00: Hope you all have a great weekend.
• 9:04
  SPEAKER_00: We'll be back on Monday.