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Transcript

Daily Market Podcast Oct 13 · 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 Tuesday morning, uh October 13th.
• 0:07
  SPEAKER_00: Walking in this morning, we've got December corn down three quarters at 482.
• 0:12
  SPEAKER_00: We've got November beans down five and a quarter at twelve eighty-two and a half.
• 0:17
  SPEAKER_00: We've got December meal down 690.
• 0:19
  SPEAKER_00: We've got November crude down$1.20 at$92.60.
• 0:22
  SPEAKER_00: It's first corn news this morning.
• 0:24
  SPEAKER_00: Uh USDA did not issue its weekly crop progress report yesterday due to the holiday.
• 0:29
  SPEAKER_00: Instead, it'll be issued this afternoon.
• 0:31
  SPEAKER_00: We expect corn harvest to be around 42%, which is slightly ahead of average.
• 0:36
  SPEAKER_00: Meanwhile, summer corn planting in Brazil continues to run ahead of average, and soybean planting is pretty fast in Mato Grosso.
• 0:44
  SPEAKER_00: Why does the corn market care?
• 0:46
  SPEAKER_00: Well, Mato Grosso is the state with by far the largest second crop or winter crop corn.
• 0:54
  SPEAKER_00: That's the corn crop planted after soybeans.
• 0:57
  SPEAKER_00: And if soybean planting is fast, then that sets the stage for soybean harvest to be ahead of average.
• 1:05
  SPEAKER_00: And at a minimum, planting of the second corn crop after soybean harvest in Mato Grosso should not be late.
• 1:13
  SPEAKER_00: If anything, it should be something ahead of average.
• 1:17
  SPEAKER_00: That is a huge deal for yield potential on this second crop corn.
• 1:23
  SPEAKER_00: So, net net today, there are no issues with corn production potential in Brazil.
• 1:31
  SPEAKER_00: With USDA's forecast of plentiful U.S.
• 1:34
  SPEAKER_00: corn supplies and no crop issues in South America, the path of least resistance for CBOT corn is lower and will continue to be lower.
• 1:45
  SPEAKER_00: As we go through the harvest, any rallies will likely be met with farmers selling, as normally the case this time of year.
• 1:52
  SPEAKER_00: Speculators are still long and in a get me out mode, so they will be there to sell rallies also.
• 1:59
  SPEAKER_00: And being as decent with corn is now some 60 cents off its highs last month, breaks will be met with end-user buying also.
• 2:08
  SPEAKER_00: Dease and March and May corn contracts should all trade below 450, but it may be a slow grind lower.
• 2:17
  SPEAKER_00: As long as South American corn crops look okay and US exports are looking not so good, CBOT corn drifts lower and lower.
• 2:41
  SPEAKER_00: That is well over half of the soybean production in Brazil that is being planted early.
• 2:46
  SPEAKER_00: That's a big deal.
• 2:48
  SPEAKER_00: Planting early helps their yield potential, obviously.
• 2:51
  SPEAKER_00: Also, USC, U.S.
• 2:53
  SPEAKER_00: soybean export uh business is just pathetic.
• 2:57
  SPEAKER_00: Outstanding sales, the soybeans that are sold but not yet shipped, are currently at 19 million tons, and half of that amount is going to China.
• 3:06
  SPEAKER_00: Uh, and we're only doing that because we got a trade deal with them.
• 3:10
  SPEAKER_00: So U.S.
• 3:11
  SPEAKER_00: soybean exports to the rest of the world are just ridiculously small.
• 3:16
  SPEAKER_00: And I've got a price chart on the bottom of page one that explains why.
• 3:20
  SPEAKER_00: Argentina soybeans are much cheaper than U.S.
• 3:23
  SPEAKER_00: soybeans every month going forward.
• 3:27
  SPEAKER_00: And Brazil are super cheap once we get into January and February in their new crop.
• 3:37
  SPEAKER_00: So U.S.
• 3:38
  SPEAKER_00: soybean export demand will just simply get worse and worse.
• 3:42
  SPEAKER_00: And let's talk about soybean oil for a minute.
• 3:45
  SPEAKER_00: The swimbean oil market has some big political issues that are looming just over the horizon.
• 3:52
  SPEAKER_00: Brazil has a mountain of cheap beef tallow that is available for export.
• 3:59
  SPEAKER_00: But the U.S.
• 4:00
  SPEAKER_00: currently has a 37.5% import tariff on Brazilian tallow.
• 4:06
  SPEAKER_00: Brazil has a presidential runoff election on October 25th.
• 4:12
  SPEAKER_00: Quickly after that election, we expect that Brazil will want to resume trade discussions to lower U.S.
• 4:20
  SPEAKER_00: tariffs on a whole range of Brazilian goods.
• 4:24
  SPEAKER_00: The obvious risk is that tariffs get lowered and a mountain of cheap tallow comes to the U.S.
• 4:31
  SPEAKER_00: to be used for biofuel use.
• 4:34
  SPEAKER_00: That would be really bearish, bean oil, and bad for U.S.
• 4:38
  SPEAKER_00: crush margins.
• 4:40
  SPEAKER_00: So CBOT at summer here, CBOT corn, I mean sorry, CBOT swimmings should drift lower and lower, and bean oil could be a pretty big risk to go lower.
• 4:53
  SPEAKER_00: As far as weather goes, we've still got this uh system coming the next several days.
• 4:58
  SPEAKER_00: Uh Texas, uh, Oklahoma up into eastern Kansas and Missouri.
• 5:03
  SPEAKER_00: Beyond that, um, really the in the one to five and six to ten day time period, uh the northern corn belt particularly should just be wide open for harvest.
• 5:15
  SPEAKER_00: Harvest should progress very rapidly.
• 5:17
  SPEAKER_00: Um, temperatures look like they're going to remain well ahead much above normal.
• 5:23
  SPEAKER_00: And precip in the plain states looks like it's gonna be normal.
• 5:28
  SPEAKER_00: The rest of the country looks like it's uh it's gonna be a little bit short.
• 5:32
  SPEAKER_00: So nothing to slow down uh grain harvest going forward.
• 5:36
  SPEAKER_00: That's it for today.
• 5:38
  SPEAKER_00: Thanks for listening.
• 5:38
  SPEAKER_00: We'll be back tomorrow.