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Transcript

Daily Market Podcast Jun 3 · M6 Capital Daily Market Podcast

• 0:00
  Good morning.
• 0:00
  This is Chris Myers with M6 Capital Management.
• 0:03
  It is Wednesday, June 3rd with our daily market letter.
• 0:06
  Walking in this morning, December corn is up one at 467 and a quarter.
• 0:11
  November beans are up five and a half at 1183 and a quarter.
• 0:15
  July crude is up 260 at 96.40.
• 0:20
  Let's start today talking about screw worm.
• 0:24
  Yesterday, USDA confirmed a new case just 25 miles from the Texas border.
• 0:30
  This is obviously slightly closer than the case last week that was 31 miles from the border.
• 0:36
  And the U.S.
• 0:38
  Secretary of Ag Rollins also announced yesterday that USDA will start holding public briefings every other day for screw worm updates.
• 0:48
  To me, it's almost like they're advertising, here it comes.
• 0:52
  So there is little doubt that the press will run some pretty nasty stories when it hits the U.S.
• 1:01
  Matter of fact, yesterday, Reuters had this headline, and I quote, flesh-eating screw worm detected 25 miles from U.S.
• 1:09
  border in Mexico, USDA says.
• 1:12
  And when that headline hits, it's going to be bearish for CME cattle prices, at least for a little while.
• 1:18
  We fully expect the knee-jerk reaction in the cattle market to be swift and brutal price break.
• 1:26
  So moving on to corn, um, the corn market is still liquidating slowly day after day.
• 1:31
  The last three days we have seen speculators selling somewhere in the neighborhood of 10,000 contracts a day.
• 1:37
  But on the flip side of this, let's look at the longer term story, global crops.
• 1:44
  Uh, yesterday we did get some updates from Australian wheat, with multiple groups now estimating a massive 35 to 40% drop in wheat production in the country.
• 1:55
  And we have poor rice crop forecasts coming out of India because their monsoon so far has been very poor.
• 2:03
  And the crop estimates for the second corn crop in Brazil continue to get smaller and smaller.
• 2:08
  And let's not overlook the fact that China continues to buy more corn from Argentina.
• 2:13
  But the market does not care about any of that today, not at all.
• 2:18
  The market is more driven by speculators getting smaller.
• 2:21
  I remain longer-term bullish, CBOT corn, but in the next one to two weeks, this get me out mentality could keep us slip-sliding lower.
• 2:32
  Moving on to soybeans, uh, today I want to talk mainly about soybean meal.
• 2:36
  Got some pretty interesting dynamics going on there.
• 2:39
  I've got a chart today uh on the bottom of page one showing how massive U.S.
• 2:45
  domestic uses of soybean meal has been.
• 2:49
  We have uh good data through at least April.
• 2:52
  We don't have all of the May data yet, but the Feb, March, April time period, we saw the largest U.S.
• 2:59
  meal meal use ever.
• 3:01
  Domestic meal use was up 10% from last year.
• 3:05
  And on top of that, meal exports have been big also.
• 3:08
  But here's where the math gets pretty interesting.
• 3:11
  U.S.
• 3:11
  soybean meal monthly production is running up 15-16% from last year.
• 3:18
  And domestic use is up 10%.
• 3:21
  The rest of it is going to export.
• 3:24
  And U.S.
• 3:25
  crush is getting bigger each month.
• 3:27
  We have three plants in the U.S.
• 3:28
  that are currently expanding.
• 3:30
  So, over the next three, four-month time period, U.S.
• 3:34
  crush gets bigger, and at the same time, meal exports from South America continue to grow and get bigger, also.
• 3:43
  Somewhere down the road, we get a double whammy with U.S.
• 3:47
  meal exports slowing down and bigger crush here, and then all of a sudden we have too much meal in the U.S.
• 3:54
  But that's not going to happen this month, but somewhere we're thinking in the August-September time period, we could be back in a situation where we see U.S.
• 4:04
  crutchers, crush U.S.
• 4:05
  crushers, sorry, searching for homes for meal.
• 4:09
  Again, the key to this will be U.S.
• 4:11
  meal exports.
• 4:13
  If when exports back off, then it's game over for U.S.
• 4:17
  meal.
• 4:17
  In the meantime, bean oil remains well supported, and we're still waiting on news, uh, on China news whether they're going to buy more U.S.
• 4:26
  beans or not.
• 4:27
  I still think CBOT soybeans will remain very well supported right now.
• 4:32
  Looking at weather, uh, we've got rains the next one to two days uh in the plains and skidding uh coming across into um the cornbelt in Iowa, Minnesota, Wisconsin, northern part of Illinois.
• 4:48
  Uh, and then later next week, uh rains kind of back off, and we got very light-scattered rains across the Corn Belt.
• 4:55
  Weather is not alarming today at all in the Corn Belt, but I continue to want to go back and focus.
• 5:02
  We really need to be watching uh the planes.
• 5:04
  It's not getting better for them.
• 5:06
  Yes, they've had a couple of uh of uh decent days of rain here, but they have got some smoking hot temperatures come back in there.
• 5:15
  We've got some uh several days this weekend Friday, Saturday, Sunday, of 95 plus degree temperatures uh in parts of Texas, Oklahoma, Pan Hannel, up into Kansas and uh parts of Nebraska.
• 5:32
  And talking to uh contacts in Colorado and western Kansas, we hear some horror stories on dryland corn out there.
• 5:42
  And this is not a good start for sorghum crops either.
• 5:46
  But again, market's not focused on that right now.
• 5:48
  That'll be uh down the road, I guess.
• 5:50
  We'll focus on that.
• 5:51
  So, anyway, that's it for today.
• 5:53
  Thanks for listening.
• 5:54
  We'll be back tomorrow.