Latest / M6 Capital Daily Market Podcast / Daily Market Podcast May 29

Transcript

Daily Market Podcast May 29 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Friday, May 29th.
• 0:08
  SPEAKER_00: Walking in this morning, we've got December corn down one at 481 and a quarter.
• 0:12
  SPEAKER_00: We've got November beans up three at 1196 and three-quarters.
• 0:16
  SPEAKER_00: We've got July Crew down above 20 at 8770.
• 0:21
  SPEAKER_00: Today I want to spend some time, particularly on corn and beans, talking about uh the some potential scenarios.
• 0:29
  SPEAKER_00: Uh we have got some very interesting grain markets that could be set up this summer.
• 0:34
  SPEAKER_00: As far as corn, we've been discussing the fact that we have lost corn area across the northern hemisphere.
• 0:40
  SPEAKER_00: And contacts in Brazil and Argentina continue to tell us that corn plantings will be down there as well this upcoming season.
• 0:49
  SPEAKER_00: And we have lost wheat yields in Europe, and we've lost wheat area in Australia and wheat area in Argentina, and rice area is down in multiple key areas around the world.
• 0:59
  SPEAKER_00: The summary here is that we are laying the groundwork for some big, big losses in global grain production.
• 1:08
  SPEAKER_00: As of today, looking at the U.S., U.S.
• 1:13
  SPEAKER_00: corn demand is really strong, especially export demand.
• 1:17
  SPEAKER_00: If we continue to lose more grain production around the world, then U.S.
• 1:22
  SPEAKER_00: corn exports stay bigger longer.
• 1:26
  SPEAKER_00: And we should not forget that this very large dry area in the central U.S.
• 1:32
  SPEAKER_00: Plains is something we've got to be watching.
• 1:36
  SPEAKER_00: I don't like that situation at all.
• 1:40
  SPEAKER_00: If we look back through history, 85% of all the Corn Belt droughts in the last 125 years worth of data that we can have access to, they all began.
• 1:52
  SPEAKER_00: 85% of those droughts began in the plain states and then they moved east.
• 1:57
  SPEAKER_00: To me, that's a big red flag today.
• 2:01
  SPEAKER_00: Today, we're okay in the cornbelt.
• 2:04
  SPEAKER_00: Crops are basically just finishing up getting planting.
• 2:08
  SPEAKER_00: U.S.
• 2:08
  SPEAKER_00: corn supplies are big enough for now.
• 2:11
  SPEAKER_00: Stocks are not super small, not yet, but there is so much potential for a bull market in corn.
• 2:18
  SPEAKER_00: And that could easily come from uh anything noteworthy that takes down U.S.
• 2:27
  SPEAKER_00: corn stocks, such as poor U.S.
• 2:31
  SPEAKER_00: crop condition ratings that would imply yield losses, or USDA lowering U.S.
• 2:36
  SPEAKER_00: corn planting estimates, or China buying U.S.
• 2:40
  SPEAKER_00: corn, or some major foreign yield issue that we have.
• 2:46
  SPEAKER_00: The picture that I've got in the on the bottom of page two paints an image of what I feel the corn market is doing right now.
• 2:58
  SPEAKER_00: The picture is of a match that is thrown and is airborne over a pile of gunpowder, multiple piles of gunpowder.
• 3:09
  SPEAKER_00: The match may or may not hit one.
• 3:11
  SPEAKER_00: It may miss and nothing happens at all.
• 3:14
  SPEAKER_00: But if it does hit one, then it turns into a barn burner in a matter of minutes.
• 3:21
  SPEAKER_00: We may go through the next four to six months, and the weather is ideal globally, and we have no major issues anywhere.
• 3:30
  SPEAKER_00: And China may delay and never get anything done.
• 3:33
  SPEAKER_00: But we could easily walk in one morning and CBOT corn is on fire and racing towards$6.
• 3:41
  SPEAKER_00: That is my fear.
• 3:43
  SPEAKER_00: As far as soybeans, longer term, soybeans get kind of messy.
• 3:47
  SPEAKER_00: There's lots of moving parts.
• 3:49
  SPEAKER_00: We have a huge U.S.
• 3:51
  SPEAKER_00: crust today, huge U.S.
• 3:53
  SPEAKER_00: crush, sorry, today, and big U.S.
• 3:55
  SPEAKER_00: meal export demand.
• 3:57
  SPEAKER_00: And we have the potential for China to take a lot of U.S.
• 4:00
  SPEAKER_00: soybeans.
• 4:01
  SPEAKER_00: That combination could really tighten up U.S.
• 4:03
  SPEAKER_00: soybean supplies in the near term.
• 4:05
  SPEAKER_00: But longer term, we have bigger soybean area in the U.S.
• 4:10
  SPEAKER_00: We have bigger, we will have bigger area soybean area in Brazil and Argentina.
• 4:15
  SPEAKER_00: We have bigger oilseed area across Europe and other areas as well.
• 4:20
  SPEAKER_00: And South America will likely steal our export our meal export demand over the next several months.
• 4:26
  SPEAKER_00: So, longer term, like 12 plus months down the road, we could easily be in a very different place with excessive sore being supplies.
• 4:36
  SPEAKER_00: But a lot could change between now and then.
• 4:39
  SPEAKER_00: So I remain bullish sore beans in the near term, like the next two to four months.
• 4:45
  SPEAKER_00: Longer term, not so much.
• 4:47
  SPEAKER_00: That time period will depend on global yields in China.
• 4:51
  SPEAKER_00: And betting on either one of those is like a monkey throwing a dart.
• 4:57
  SPEAKER_00: Moving on to cattle, uh, the cattle market has got quite a few opposing forces tugging pretty hard at it right now.
• 5:06
  SPEAKER_00: On one hand, we have a stubborn cattle feeder that does not want to pay the high prices for feeders right now.
• 5:13
  SPEAKER_00: So he wants to keep his current cattle on feed a little bit longer if he can.
• 5:18
  SPEAKER_00: And we also have a seasonal tendency for beef prices to trend higher from now until at least July 4th.
• 5:26
  SPEAKER_00: Both of those are bullish factors.
• 5:31
  SPEAKER_00: On the other hand, we have a beef packer that is cutting kills because he's losing over$300 ahead that he processes.
• 5:40
  SPEAKER_00: And the packer has lost a small fortune so far in 2026.
• 5:45
  SPEAKER_00: There is no way that can economically continue, not at these record losses.
• 5:50
  SPEAKER_00: And we also have a speculator that is a very large, has very large long positions in live cattle and feeder cattle.
• 5:58
  SPEAKER_00: That is what caused some of our massive breaks that we had late last week.
• 6:02
  SPEAKER_00: Those are potentially bearish factors.
• 6:05
  SPEAKER_00: So which hand wins?
• 6:07
  SPEAKER_00: Well, beef prices are already super high.
• 6:11
  SPEAKER_00: And we are told that this week we've got several packers with push lists.
• 6:16
  SPEAKER_00: A push list is a list of beef cuts that they cannot sell and they are openly willing to discount.
• 6:23
  SPEAKER_00: That makes you wonder if beef can really rally much.
• 6:28
  SPEAKER_00: And there are also now quite a few retailers that, if you look at their ads, they are featuring more seafood than they are beef right now.
• 6:36
  SPEAKER_00: And that ain't normal.
• 6:38
  SPEAKER_00: Not at this time of year when we should be rolling into grilling summer grilling season.
• 6:43
  SPEAKER_00: Again, not good for beef prices rallying.
• 6:47
  SPEAKER_00: I also believe that we will see more and more packers discounting heavy carcasses.
• 6:52
  SPEAKER_00: Some of these steers are getting too big to handle and slaughterhouses in the slaughterhouses, and packers will try to use this discount uh to better control their purchase prices of cattle if they can.
• 7:05
  SPEAKER_00: And then we have the big one.
• 7:07
  SPEAKER_00: We have the big spec long.
• 7:10
  SPEAKER_00: Uh, and this big spec long has watched a very large portion of his profits erode in the last several weeks.
• 7:18
  SPEAKER_00: And if the market starts to sell off from here, I think we could see these speculators running over each other trying to figure out how to get out.
• 7:27
  SPEAKER_00: Then let's not forget this new world screw worm is headed into the U.S.
• 7:34
  SPEAKER_00: Um, he's made it within 60 miles of the Texas border so far.
• 7:39
  SPEAKER_00: And I think it's pretty much a given that it will end up in Texas.
• 7:43
  SPEAKER_00: It's just a matter of time.
• 7:44
  SPEAKER_00: Logically, we have to believe that if it does not happen naturally over the next, say, two, three months, the fly could easily get shoved up here from a hurricane or a strong storm in the late summer.
• 7:58
  SPEAKER_00: And if that happens, the cover story on CNN that night will be of pictures of flesh-eating worms and CME cattle futures will crater.
• 8:08
  SPEAKER_00: So, as I stated last week, I believe the fat cattle prices are vulnerable to the downside.
• 8:14
  SPEAKER_00: Feeder prices may be a different deal.
• 8:17
  SPEAKER_00: Um, we will be short feeder supplies in the United States for a long time, well into at least late 27 and maybe into early part of 2028.
• 8:28
  SPEAKER_00: But feeders are basically a derivative of live cattle and corn.
• 8:35
  SPEAKER_00: To me, a strong corn market is the biggest risk factor that could drive feeder prices lower.
• 8:43
  SPEAKER_00: Moving on to weather, um we do have a system that's out in South Dakota, Nebraska, uh parts of eastern Kansas right now, uh draped all the way across over toward Georgia.
• 8:58
  SPEAKER_00: Uh that's the best chance that we've got uh for rains in the plain states for a little while.
• 9:06
  SPEAKER_00: And then we follow that up.
• 9:08
  SPEAKER_00: They've got uh another slight chance of rain in Nebraska, Kansas on late Saturday into Sunday.
• 9:16
  SPEAKER_00: Um and then looking further down the road, you look at the six to ten day, eight to fourteen day time period, it looks like from Texas to Georgia stays above normal on precip, and most of the rest of the country is normal ish on precip.
• 9:35
  SPEAKER_00: So that's it for today.
• 9:37
  SPEAKER_00: Hope everybody has a great weekend.
• 9:38
  SPEAKER_00: Thanks for listening, and we'll be back on Monday.