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Transcript

Daily Market Podcast Oct 23 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning and a happy Friday.
• 0:02
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Friday, October 23rd.
• 0:09
  SPEAKER_00: Walking in this morning, December corn is down a penny at 459.5.
• 0:13
  SPEAKER_00: November beans are up two and a half at 1255.
• 0:17
  SPEAKER_00: De Summer Meal is up$1.10.
• 0:19
  SPEAKER_00: And D Summer Crude is up$2.10 and back above$100 is$101.50 this morning.
• 0:26
  SPEAKER_00: As far as corn news, CBOT corn has ended lower 16 of the last 20 trading days.
• 0:34
  SPEAKER_00: We have spent quite a bit of time in our talks the last several weeks discussing speculator selling that is pushing corn prices lower.
• 0:44
  SPEAKER_00: But the ultimate reason behind the spec selling is that there is no bull story for corn any longer.
• 0:50
  SPEAKER_00: The U.S.
• 0:51
  SPEAKER_00: corn crop is big.
• 0:53
  SPEAKER_00: We get a lot of seed company and university seed trial data.
• 0:58
  SPEAKER_00: And now all that data continues to suggest that the U.S.
• 1:01
  SPEAKER_00: corn yield is at least equal to and maybe even slightly larger than USDA's last estimate.
• 1:08
  SPEAKER_00: And there is plenty of corn in South America keeping their corn prices cheaper than U.S.
• 1:14
  SPEAKER_00: and keeping U.S.
• 1:15
  SPEAKER_00: exports limited.
• 1:16
  SPEAKER_00: And new crop exports, I mean sorry, new crop prospects for South America are very good thus far.
• 1:24
  SPEAKER_00: Matter of fact, Argentina corn planting as of yesterday was 39% complete.
• 1:29
  SPEAKER_00: This is a full five weeks ahead of average and one of the fastest planting paces ever.
• 1:36
  SPEAKER_00: The Rosario Grain Exchange in Argentina suggests or they forecast this upcoming crop at 67.5 million tons.
• 1:46
  SPEAKER_00: That is 12.5 million tons above what USDA is forecasting in Argentina.
• 1:53
  SPEAKER_00: Also, Conab, the basically the USDA of Brazil, is forecasting Brazil's upcoming corn crop some 9 million tons larger than what USDA is forecasting.
• 2:06
  SPEAKER_00: So why do we care?
• 2:08
  SPEAKER_00: Well, if those larger crops in both Brazil and Argentina are correct, then U.S.
• 2:14
  SPEAKER_00: corn exports will be a whole lot smaller than what USDA is forecasting, and therefore ending stocks a whole lot bigger.
• 2:22
  SPEAKER_00: Six weeks ago, there were many of us that were scared we were headed towards the U.S.
• 2:28
  SPEAKER_00: corn ending stocks being a very small 1.3 billion bushels, or maybe even smaller.
• 2:35
  SPEAKER_00: Today, many parts of that equation have changed, and we are now looking at a potential ending stocks well over 2 billion bushels.
• 2:44
  SPEAKER_00: And that means a lot lower corn prices.
• 2:47
  SPEAKER_00: Yes, we have a long growing season ahead of us in South America, but if all this plays out, CBOT March corn futures should eventually trade 425 and likely lower.
• 2:59
  SPEAKER_00: First soybean news, the yield reports that we get on soybeans suggest the U.S.
• 3:06
  SPEAKER_00: yield is at least equal to USD's latest estimate and possibly even one bushel higher.
• 3:13
  SPEAKER_00: So we have plenty of beans in the US.
• 3:16
  SPEAKER_00: This is bearish.
• 3:18
  SPEAKER_00: However, crush margins are still high in the US, and U.S.
• 3:21
  SPEAKER_00: crust should be record large month after month after month.
• 3:25
  SPEAKER_00: This is bullish.
• 3:27
  SPEAKER_00: But as crush rates pick up and cashmere prices in the US get cheaper and cheaper, this pulls crush margins lower.
• 3:35
  SPEAKER_00: This is bearish.
• 3:37
  SPEAKER_00: Argentina beans are by far the cheapest in the world for November and December.
• 3:41
  SPEAKER_00: Brazilian beans are the cheapest for January, February, and every month beyond that.
• 3:47
  SPEAKER_00: This screams that U.S.
• 3:48
  SPEAKER_00: exports will be very small going forward.
• 3:51
  SPEAKER_00: This is bearish.
• 3:53
  SPEAKER_00: But we have some very wet weather in southern Brazil that we've talked about in recent days, and this is slowing planting pace.
• 4:02
  SPEAKER_00: If this continues, this would be bullish.
• 4:05
  SPEAKER_00: So CBOT soybeans are struggling with lots of moving parts pointing in different directions.
• 4:12
  SPEAKER_00: I continue to argue that upside for CBOT soybeans is limited unless we have some major crop issue in South America.
• 4:20
  SPEAKER_00: But at the same time, we need meal prices lower and crush margins quite a bit lower before CBOT soybeans can sell off much more.
• 4:29
  SPEAKER_00: So the end result is that the market trades sideways, looking for some clarity and some direction.
• 4:36
  SPEAKER_00: As far as cattle news this morning, the rally in futures in the last 10 days has fueled a rally in cash cattle.
• 4:42
  SPEAKER_00: Last week, cash cattle in Kansas and Nebraska was up around$4 from the previous week.
• 4:48
  SPEAKER_00: But I still contend that the issues in the cattle and the beef markets still remain.
• 4:54
  SPEAKER_00: We have way too many fat cattle right now.
• 4:57
  SPEAKER_00: The beef market is no good, and packers are not willing to pick up kills.
• 5:01
  SPEAKER_00: All this screams that rallies will likely not be sustainable.
• 5:05
  SPEAKER_00: We are even hearing that there are several packers that have beef that they cannot sell.
• 5:09
  SPEAKER_00: And there's talk that some of these same packers will once again cut kills in coming weeks in an attempt to keep the beef price from dropping even further.
• 5:18
  SPEAKER_00: USDA will issue its monthly cattle on feed report this afternoon around 2 p.m.
• 5:24
  SPEAKER_00: Central time.
• 5:25
  SPEAKER_00: We expect placements into feed lots in September was down 7% from last year.
• 5:31
  SPEAKER_00: That makes five months in a row of small placements.
• 5:35
  SPEAKER_00: This all points to smaller and smaller number of cattle on feed, especially once we get into early 2027.
• 5:42
  SPEAKER_00: I've got a chart on the bottom of page two, and it shows that by the time we get to April of 27, we expect U.S.
• 5:50
  SPEAKER_00: cattle on feed numbers to be down 3% year over year.
• 5:53
  SPEAKER_00: That would be the smallest cattle numbers in at least 10 years.
• 5:58
  SPEAKER_00: That should ultimately be supportive to the market longer term.
• 6:03
  SPEAKER_00: We just have to get past this pitiful beef market the next several months.
• 6:07
  SPEAKER_00: Also, there's one more item that we really need to discuss, and that's Brazilian beef.
• 6:12
  SPEAKER_00: There's a runoff presidential election this Sunday in Brazil, October 25th.
• 6:17
  SPEAKER_00: When that is over, we fully expect the government in Brazil, regardless of who wins, we expect the government in Brazil to come back to the U.S.
• 6:26
  SPEAKER_00: and try to renegotiate U.S.
• 6:28
  SPEAKER_00: tariffs.
• 6:29
  SPEAKER_00: And Brazil has plenty of beef to export.
• 6:32
  SPEAKER_00: Part of their ask will likely be for lower tariffs on Brazilian beef coming to the U.S.
• 6:38
  SPEAKER_00: And that ain't good.
• 6:39
  SPEAKER_00: In recent months, the market has dropped very quickly on any talk of more beef coming to the U.S.
• 6:45
  SPEAKER_00: That will very likely be a discussion and news article in the coming weeks.
• 6:51
  SPEAKER_00: So, NetNet, it feels like rallies in cattle and feeders are in the near term very limited.
• 6:58
  SPEAKER_00: Longer term, we may have yet to have a bull story with smaller cattle numbers in 2027, but we may also have to deal with talking more beef imports.
• 7:08
  SPEAKER_00: So as of today, we're cautiously bullish for early 2027.
• 7:14
  SPEAKER_00: As far as weather goes, we've still got this rainy system in the southern and central plains that lingers around for multiple days now.
• 7:24
  SPEAKER_00: Harvest in the corn belt should continue to just blow and go.
• 7:28
  SPEAKER_00: But the real feature in weather remains uh Paraná, Brazil.
• 7:32
  SPEAKER_00: Uh, I've got a on page three, I've got a chart or map, rather, of 10-day weather forecast.
• 7:39
  SPEAKER_00: And it looks like central Paraná is getting five to six inches of rain and is bleeding over into areas around it, uh, meaning uh west into Paraguay and northwest into Mato Grosso do Sul and north up into Sao Paulo.
• 7:57
  SPEAKER_00: So we need to get this corrected pretty quick.
• 8:00
  SPEAKER_00: If we're still looking at this same scenario uh next week, the market's going to start paying attention to this because then you start uh messing up planning progress and the market's going to assume you're losing acres of soybeans in Brazil.
• 8:13
  SPEAKER_00: So that's it for this Friday.
• 8:15
  SPEAKER_00: Y'all have a great weekend.
• 8:16
  SPEAKER_00: We'll be back on Monday.