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Transcript

Daily Market Podcast Oct 19 · 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 Monday morning, October 19th.
0:06
SPEAKER_00: Walking in this morning, December corn is down two and three quarters at 471 and a half.
0:11
SPEAKER_00: November beans are down two at 1259 and a quarter.
0:15
SPEAKER_00: December meal is unchanged, and December crude is down$1.30 this morning.
0:20
SPEAKER_00: As far as corn news, of the two, let's let's focus on Brazil today.
0:25
SPEAKER_00: Of the two corn crops in Brazil, the second corn crop planted after soybean harvest is by far the biggest one.
0:32
SPEAKER_00: Matter of fact, the second corn crop in Brazil represents 75% of Brazil's annual corn production.
0:39
SPEAKER_00: We've reported for the last several weeks that first crop corn planting, the summer crop, is ahead of normal.
0:46
SPEAKER_00: But the much, much bigger story is that soybean planting in Monte Grosso is record fast, and that means soybean harvest should be fast, and thus planting of the second corn crop should be ahead of normal.
1:01
SPEAKER_00: And that is potentially a huge deal.
1:05
SPEAKER_00: Planting early gives a second corn crop in Brazil a much, much higher yield potential.
1:09
SPEAKER_00: So, net net, today it appears that Brazil is set for a record corn crop in 2027.
1:17
SPEAKER_00: And we've already discussed that Argentina is headed toward a record corn crop also.
1:22
SPEAKER_00: Now, these crops won't be harvested for many months, but if that happens, U.S.
1:27
SPEAKER_00: corn exports will be much, much lower than what USTA is currently forecasting, and therefore U.S.
1:34
SPEAKER_00: ending corn stocks will be much larger.
1:37
SPEAKER_00: So going forward, as long as weather and crop prospects remain good in South America, CBOT corn will have very limited upside, and the path of least resistance will be lower and lower.
1:51
SPEAKER_00: If by the time we get to February, March time period and corn crop forecast in South America continue to be record large, then we could easily see CBOT March corn trading near 425, maybe even lower.
2:08
SPEAKER_00: This morning is trading 484.
2:13
SPEAKER_00: So the point here is the near-term focus for the market will be South American crops and the increasingly lacking U.S.
2:21
SPEAKER_00: export business.
2:23
SPEAKER_00: As far as soybeans go, um, soybean market is being driven by two main items right now.
2:29
SPEAKER_00: One, yield reports imply that the U.S.
2:32
SPEAKER_00: soybean yield is even bigger than what USDA reported 10 days ago.
2:38
SPEAKER_00: And number two, U.S.
2:41
SPEAKER_00: export demand is slipping lower and lower.
2:44
SPEAKER_00: We mentioned a few minutes ago that swimming planning in Monte Grosso is record fast.
2:48
SPEAKER_00: Planning is 52% complete in Monte Grosso.
2:51
SPEAKER_00: This is the earliest we have ever seen Mato Grosso reach the halfway mark.
2:57
SPEAKER_00: And Brazil's soybean area is increasing this year with big expectations for a crop in Brazil.
3:04
SPEAKER_00: New crop soybean prices in Brazil are cheap.
3:08
SPEAKER_00: Jan soybeans out of Brazil are quoted$10 a ton cheaper than U.S.
3:12
SPEAKER_00: beans this morning, and February is$35 a ton cheaper.
3:17
SPEAKER_00: So global importers, including China, will draw down their inventories, wait on much cheaper soybean soybean shipments out of Brazil in January and February and beyond.
3:30
SPEAKER_00: So that becomes the biggest factor that the market will be watching.
3:33
SPEAKER_00: If weather's okay and Brazil's crop continues to be good, then CBOT soybeans have limited upside and we drift lower and lower.
3:43
SPEAKER_00: But this is a double-edged sword.
3:46
SPEAKER_00: If Brazil turns hot and dry, the market could rally very fast.
3:51
SPEAKER_00: We've seen this movie play out before.
3:53
SPEAKER_00: The entire world will be shortbought, waiting on cheap beans out of Brazil, and Brazil gets a crop issue, and everybody panic buys at one time.
4:02
SPEAKER_00: It makes for a potentially bumpy ride the next several months.
4:05
SPEAKER_00: The summary here, soybean prices drift lower, but if we get a crop issue in Brazil, we rally fast.
4:12
SPEAKER_00: On the bottom of page one, I've got um two charts on Brazil, one on corn production, one on soybean production.
4:20
SPEAKER_00: So you can see what I'm talking about here.
4:22
SPEAKER_00: As far as weather goes, um this rainy system in Texas continues and looks like uh later this week and into the weekend, the plain states start getting more rain.
4:38
SPEAKER_00: But as far as harvest goes, uh looks like harvest should go, uh particularly in Corn Belt, should be blowing and going in most areas.
4:49
SPEAKER_00: South America is what we really need to be focused on for weather.
4:53
SPEAKER_00: And Paranag just continues to get hammered with rain.
4:57
SPEAKER_00: Um and this Paraná into Paraguay area uh is getting, you know, what in the next 10 days, three to four inches uh pretty general rains down there.
5:13
SPEAKER_00: And this is an issue because the soils are saturated and rivers are high and you got floods going on.
5:20
SPEAKER_00: Not really a huge issue so far as as far as crops go because planting is ahead of schedule, but uh you are screwing up some um, you're flooding some towns and you're screwing up some logistics on some rivers down there.
5:34
SPEAKER_00: As far as Argentina goes, um, most everybody's got decent soil moisture, not everybody, but most everybody.
5:41
SPEAKER_00: And you've got decent rains coming.
5:43
SPEAKER_00: Corn planting is super fast, soybean planting will begin here soon.
5:48
SPEAKER_00: So really no issues whatsoever in Brazil.
5:51
SPEAKER_00: And I'm sorry, in Argentina right now.
5:53
SPEAKER_00: That's it for today.
5:54
SPEAKER_00: Thanks for listening.
5:55
SPEAKER_00: We'll be back tomorrow.