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Daily Market Podcast Sep 21 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning and happy Monday.
• 0:02
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Monday morning, September 21st.
• 0:10
  SPEAKER_00: Um, walking in this morning, we got De Summer Corn up six cents at 533 and a half.
• 0:15
  SPEAKER_00: We've got November beans up 10.5 at 13.14 this morning.
• 0:20
  SPEAKER_00: D Summer Meal is up 290 at 361.50.
• 0:23
  SPEAKER_00: November crude is down 280 at 93.30.
• 0:27
  SPEAKER_00: We got a lot to talk about today.
• 0:29
  SPEAKER_00: Let's start with U.S.
• 0:30
  SPEAKER_00: and China.
• 0:31
  SPEAKER_00: Over the weekend, U.S.
• 0:33
  SPEAKER_00: and Chinese officials met in New York City to lay some groundwork before Z visits the White House on Thursday.
• 0:41
  SPEAKER_00: Last night, U.S.
• 0:42
  SPEAKER_00: Treasury Secretary Basent made the following statement.
• 0:46
  SPEAKER_00: He stated, we had a very successful engagement with China on trade.
• 0:52
  SPEAKER_00: Well, the market is going to take that little bitty statement to mean that China will buy more U.S.
• 0:58
  SPEAKER_00: acts.
• 0:59
  SPEAKER_00: Therefore, we're higher in corn and beans and wheat walking in this morning.
• 1:04
  SPEAKER_00: Whether this happens or not, who knows.
• 1:07
  SPEAKER_00: But it is likely a pretty safe bet that U.S.
• 1:09
  SPEAKER_00: politicians will have a positive spin on their progress with China this week.
• 1:14
  SPEAKER_00: At some point, they may even get blisters on their hands from patting themselves on the back so much.
• 1:19
  SPEAKER_00: Now, we also need to talk about cattle, which we typically don't do on Mondays.
• 1:24
  SPEAKER_00: The USDA Cattle and Feed Report on Friday afternoon showed even smaller U.S.
• 1:30
  SPEAKER_00: placements into feed lots in August than what we expected.
• 1:33
  SPEAKER_00: And that is bullish for live cattle futures today.
• 1:39
  SPEAKER_00: Now let's talk about corn.
• 1:42
  SPEAKER_00: CBOT corn market will be ultra sensitive to any news on China buying U.S.
• 1:48
  SPEAKER_00: corn.
• 1:48
  SPEAKER_00: That will be the main driving factor this week.
• 1:52
  SPEAKER_00: I am clearly already in the camp that the U.S.
• 1:55
  SPEAKER_00: crop is getting smaller and that means tighter corn stocks coming ahead.
• 2:01
  SPEAKER_00: So us adding export demand to China would be bullish.
• 2:05
  SPEAKER_00: But the devil will be in the details.
• 2:08
  SPEAKER_00: If US officials claim that China will buy more U.S.
• 2:12
  SPEAKER_00: acts, is there a timeline?
• 2:15
  SPEAKER_00: What are the stated amounts?
• 2:17
  SPEAKER_00: What happens if China does not follow through?
• 2:19
  SPEAKER_00: The devil's in the details.
• 2:21
  SPEAKER_00: One item that the market seems to be really watching is if China drops this 13% import tariff on U.S.
• 2:29
  SPEAKER_00: corn.
• 2:30
  SPEAKER_00: To be honest with you, I don't see that this really matters.
• 2:32
  SPEAKER_00: But there are a lot of people in the market that think this is the key piece of data to watch for.
• 2:38
  SPEAKER_00: My argument is this.
• 2:40
  SPEAKER_00: If there is some trade agreement, then uh the Chinese government could import everything.
• 2:48
  SPEAKER_00: That's what they're currently doing for U.S.
• 2:50
  SPEAKER_00: soybeans.
• 2:51
  SPEAKER_00: The Chinese government does not charge themselves an import tariff.
• 2:55
  SPEAKER_00: They don't need the drop to drop this 13% import tariff to get it done.
• 3:01
  SPEAKER_00: If they don't drop the import tariff, then that allows the government officials to totally control the grain that comes in, how much and when.
• 3:12
  SPEAKER_00: If they drop the import tariff, then to some degree they lose a little bit of their control.
• 3:17
  SPEAKER_00: And yes, this may allow for something that is more resembling of a free market, but that step is absolutely not necessary.
• 3:28
  SPEAKER_00: In my opinion, quite frankly, it really doesn't matter if they drop the import tariff or not.
• 3:33
  SPEAKER_00: But there's a lot of people in the market that think that's the coup de gras to watch for.
• 3:38
  SPEAKER_00: On the flip side, if by chance US and China butt heads over any number of other topics they're talking about in these meetings, and it ends with no grain trade agreement, then that could be very bearish for CBOT corn.
• 3:53
  SPEAKER_00: As we've discussed, speculators have a record large long position in corn right now, and they would run over each other getting out.
• 4:02
  SPEAKER_00: So, net net, this could be a pretty volatile week with the market reacting to multiple Chinese news headlines.
• 4:11
  SPEAKER_00: As we learn more about what's going on, we will send out information.
• 4:16
  SPEAKER_00: Moving on to soybeans, um, obviously, Chinese news will be equally important impact on CBOT soybeans this week.
• 4:24
  SPEAKER_00: Meanwhile, we've got look at other market factors.
• 4:28
  SPEAKER_00: Soybean meal futures collapsed on Friday, erasing multiple days of gains very quickly.
• 4:34
  SPEAKER_00: And the big point there is that harvest should pick up in multiple cornbed states this week, and this should provide beans to several Western crush plants that have slowed down operations.
• 4:45
  SPEAKER_00: At the same time, crude oil and energy markets have dropped 7-8% since mid-last week.
• 4:52
  SPEAKER_00: That's obviously bearish for bean oil.
• 4:54
  SPEAKER_00: And if we shift down to South America for a minute, soybean planting in Argentina won't be in for another month.
• 5:02
  SPEAKER_00: Planting in Brazil is just getting started.
• 5:04
  SPEAKER_00: Mato Grosso is a state to watch.
• 5:06
  SPEAKER_00: Mato Grosso is obviously the largest soybean producing state in Brazil, and they are currently very dry.
• 5:13
  SPEAKER_00: Farmers there are waiting on seasonal rains to begin planning.
• 5:16
  SPEAKER_00: Not a big deal today, but if the weather does not change, it will be a big deal in about two weeks.
• 5:22
  SPEAKER_00: Something to watch.
• 5:24
  SPEAKER_00: As for this week, news on any Chinese trade talks will dominate the market.
• 5:29
  SPEAKER_00: If we don't get some additional U.S.
• 5:32
  SPEAKER_00: export business to China, then that will be bearish.
• 5:36
  SPEAKER_00: As of this morning, Brazil and Argentina and Uruguay soybeans are all cheaper than U.S.
• 5:42
  SPEAKER_00: Gulf soybean prices.
• 5:44
  SPEAKER_00: So, net net, we're losing export business.
• 5:47
  SPEAKER_00: Longer term, CBOT soybeans will be much more driven by crop outlooks in South America.
• 5:54
  SPEAKER_00: But first we got to get through planting season.
• 5:56
  SPEAKER_00: If planting goes okay and their crops are decent, then longer term it will be hard to hold a rally in CBOT soybeans.
• 6:04
  SPEAKER_00: But we've got a long way to go to get there.
• 6:07
  SPEAKER_00: As far as weather goes, um we've got a little bit of rain in western states this week.
• 6:16
  SPEAKER_00: Net net, you're gonna be kind of normal-ish type precip uh for the next week to 10 days uh across the central and western corn belt.
• 6:27
  SPEAKER_00: The area we need really need to be watching in weather is gonna be central Brazil, Mato Grosso, Goias, uh Bahia, Mato Grosso do Sul.
• 6:38
  SPEAKER_00: I've got a map on the bottom uh of page two highlighting this area.
• 6:42
  SPEAKER_00: Their 10-day forecast is hardly any Marshall whatsoever.
• 6:47
  SPEAKER_00: So the weather does not look to be changing down there.
• 6:50
  SPEAKER_00: And Central Argentina, they've got light scattered rains this week.
• 6:56
  SPEAKER_00: Their rainfall needs to pick up.
• 6:57
  SPEAKER_00: They're not in a critically dry situation yet, but they need more rain.
• 7:03
  SPEAKER_00: That's it for today.
• 7:04
  SPEAKER_00: Thanks for listening.
• 7:05
  SPEAKER_00: We'll be back tomorrow.