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Transcript

Daily Market Podcast Oct 22 · 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 Thursday morning, October 22nd.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is up one and three quarters at 40.65.
• 0:11
  SPEAKER_00: November soybeans are up two at 1247 and a quarter.
• 0:15
  SPEAKER_00: December meal is down 60 cents.
• 0:18
  SPEAKER_00: And December crude is up 230 this morning.
• 0:22
  SPEAKER_00: As far as corn news, um, we obviously have no clue when or how grain exports from the Black Sea will begin again.
• 0:30
  SPEAKER_00: But whenever that does happen, Ukraine will have plenty of corn to export.
• 0:37
  SPEAKER_00: It appears that their corn crop was decent this last summer.
• 0:41
  SPEAKER_00: Harvested yields so far have been big, and their livestock industry has been devastated the last few years with all the war.
• 0:48
  SPEAKER_00: And grain exports, not just corn, but grain exports last several months have been ridiculously small.
• 0:55
  SPEAKER_00: So at some point, that corn's all looking for a home.
• 0:59
  SPEAKER_00: As for U.S.
• 1:00
  SPEAKER_00: exports, high barge freight rates on the Mississippi River and high rail freight rates going to the PNW are keeping U.S.
• 1:07
  SPEAKER_00: corn priced way too high.
• 1:09
  SPEAKER_00: So U.S.
• 1:10
  SPEAKER_00: corn remains the most expensive corn in the world today.
• 1:13
  SPEAKER_00: That keeps U.S.
• 1:14
  SPEAKER_00: corn export demand pitiful.
• 1:18
  SPEAKER_00: As for CBOT corn, speculators continue to sell more and more, which is what drove us to new lows for the move yesterday before we bounced and actually ended the day higher.
• 1:28
  SPEAKER_00: Maybe we stabilized for a day or so, but we still have way too large of a spec long, and they have way too much selling to do to get out.
• 1:38
  SPEAKER_00: So we maintain that the path of least resistance remains lower, both in the near term and longer term for CBOT corn.
• 1:46
  SPEAKER_00: As far as soybean news, the last several weeks we have discussed the record large crop in the U.S., which may actually be getting bigger, and the very likely record large crops coming in South America.
• 1:58
  SPEAKER_00: Okay, that's not new news.
• 2:01
  SPEAKER_00: And we all know that China has bought a lot of beans from the U.S.
• 2:05
  SPEAKER_00: due to this trade agreement that was signed last fall.
• 2:08
  SPEAKER_00: But we may be running into a hiccup with China.
• 2:11
  SPEAKER_00: Chinese crushers have been working with negative crush margins for several weeks now.
• 2:16
  SPEAKER_00: And with all the bean purchases they've had from the U.S.
• 2:19
  SPEAKER_00: so far, their soybean inventories in China are quite large.
• 2:24
  SPEAKER_00: Hog margins in China are horrible, and their hog industry is in the process of liquidating and getting smaller right now.
• 2:31
  SPEAKER_00: So this all begs one major question.
• 2:34
  SPEAKER_00: Will Chinese import demand be very good in the months to come?
• 2:39
  SPEAKER_00: Now, I'll be the first to argue that trying to figure out what China may or may not do is never quite as easy as it seems it should be.
• 2:47
  SPEAKER_00: But the market will certainly be questioning Chinese demand going forward.
• 2:52
  SPEAKER_00: And China, just as a reminder, is by far the largest soybean importer in the world.
• 3:00
  SPEAKER_00: Back in the U.S., crush margins have come down 10 to 15 cents a bushel this week, largely due to a break in soybean meal.
• 3:07
  SPEAKER_00: I continue to argue that we need meal to break hard to get a big break in soybeans.
• 3:15
  SPEAKER_00: We need crush margins to continue to back off quite a bit.
• 3:19
  SPEAKER_00: Meanwhile, it looks like this wet area in southern Brazil will remain wet.
• 3:24
  SPEAKER_00: Matter of fact, the pre-sip forecast overnight got even wetter than they were yesterday.
• 3:29
  SPEAKER_00: The market will begin to focus on this, and soybean, if if this all comes to fruition, soybean plannings will be delayed.
• 3:37
  SPEAKER_00: The soybean market has, in my opinion, has way too many balls up in the air today.
• 3:42
  SPEAKER_00: There's no major clear-cut driver right now.
• 3:45
  SPEAKER_00: So I think we continue to chop around, lacking direction, until we get a little bit more clarity.
• 3:52
  SPEAKER_00: The chart that I have listed on the bottom of page one today is uh fertilizer prices for the last 12 months, uh starting early October a year ago.
• 4:02
  SPEAKER_00: And uh this is the average for the cornbelt.
• 4:05
  SPEAKER_00: And just as a point of reference, uh DAP prices are up 4%, urea prices are up 13% year over year, potash is up eight percent year over year.
• 4:17
  SPEAKER_00: Um weather in the corn belt still looks like most of the uh corn belt, especially the eastern cornbelt, will have wide open weather, harvest should just be blowing and going.
• 4:30
  SPEAKER_00: The big focus, I think, as far as weather needs to be uh southern Brazil, and this is southern parts of Mato Grosso do Sul and mainly in Paraná and into Paraguay.
• 4:42
  SPEAKER_00: And they like I said earlier, the forecast got wetter, and there's parts of Paraná that are forecast to get eight to nine inches of rain in the next 10 days.
• 4:53
  SPEAKER_00: That's just not going to work well for planting crops.
• 4:56
  SPEAKER_00: So uh the market is gonna start focusing more and more on this.
• 5:00
  SPEAKER_00: This is something we gotta be watching.
• 5:02
  SPEAKER_00: That's it for today.
• 5:03
  SPEAKER_00: Thanks for listening.
• 5:04
  SPEAKER_00: We'll be back tomorrow.