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Daily Market Podcast Oct 29 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Thursday morning, October 29th.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is down three quarters at 451 and a quarter.
• 0:13
  SPEAKER_00: November beans are down eight and a half at twelve sixteen and a quarter.
• 0:17
  SPEAKER_00: December meal is down 210.
• 0:18
  SPEAKER_00: And D Summer Crude is down 90 cents, but still above$100 at$101.90 right now.
• 0:25
  SPEAKER_00: As far as corn news this morning, CBOT corn bounced a little yesterday and actually closed higher for a change.
• 0:32
  SPEAKER_00: But I don't think this is the end of our slide lower.
• 0:34
  SPEAKER_00: D Summer Corn has traded lower 22 of the last 27 trading days.
• 0:39
  SPEAKER_00: Speculators still have another 100,000 or so contracts of CBOT corn that they are long, and we fully expect them to get out of those longs as well.
• 0:49
  SPEAKER_00: And big crops keep getting bigger.
• 0:51
  SPEAKER_00: It seems that every estimate of crop production that we see in South America is bigger than the previous estimate.
• 0:57
  SPEAKER_00: With U.S.
• 0:58
  SPEAKER_00: corn harvest around 70%, we're on the back end of selling pressure from harvest.
• 1:03
  SPEAKER_00: U.S.
• 1:03
  SPEAKER_00: corn export demand is still pathetic.
• 1:06
  SPEAKER_00: You know, again, none of this is new news.
• 1:09
  SPEAKER_00: But the one shining light is U.S.
• 1:12
  SPEAKER_00: corn demand for ethanol, which is big.
• 1:14
  SPEAKER_00: I've got a chart on the bottom of page one.
• 1:16
  SPEAKER_00: It shows that ethanol production last week was up 1% from a year ago and a new record for the week.
• 1:24
  SPEAKER_00: But ethanol production is about the only positive thing going for corn demand.
• 1:30
  SPEAKER_00: CBOT corn is now down some 90 cents from its high in early September.
• 1:35
  SPEAKER_00: We should see end user buying under the market as we break further.
• 1:39
  SPEAKER_00: I don't think this will be enough to stop prices from continuing their slide lower.
• 1:44
  SPEAKER_00: The main focus for the corn market the next several months will be crops in South America and especially Argentina.
• 1:51
  SPEAKER_00: As long as those crops are okay, rallies in CBOT corn should be sold, and corn prices continue to just slip slide lower.
• 2:01
  SPEAKER_00: But any hot, dry weather that we see coming into particularly Argentina, and the market will pay attention very quickly.
• 2:10
  SPEAKER_00: As far as soybean news, speculators continue to sell out of longs in CBOT soybeans and soybean meal and soybean oil.
• 2:19
  SPEAKER_00: There is very little bullish news to sustain any kind of rally in soybean prices right now.
• 2:24
  SPEAKER_00: It looks like soybean crops will be record large in the U.S.
• 2:30
  SPEAKER_00: and Brazil, and maybe even Argentina.
• 2:33
  SPEAKER_00: And U.S.
• 2:33
  SPEAKER_00: export demand is still not very good.
• 2:36
  SPEAKER_00: Argentina soybeans are the cheapest in the world for November, December, and early January.
• 2:42
  SPEAKER_00: Brazilian beans are the cheapest in the world for February all the way out through July.
• 2:48
  SPEAKER_00: We have not discussed soybean oil much lately.
• 2:52
  SPEAKER_00: Current soybean oil prices are the lowest in seven months.
• 2:57
  SPEAKER_00: U.S.
• 2:58
  SPEAKER_00: biofuel production is good, but we are importing way too much cheap oils as feedstocks into the U.S., mainly used cooking oil and pom oil.
• 3:09
  SPEAKER_00: This is hurting U.S.
• 3:10
  SPEAKER_00: soybean oil demand.
• 3:12
  SPEAKER_00: I still contend that EPA and U.S.
• 3:15
  SPEAKER_00: lawmakers have had chances over and over and over to limit the importation of these cheap oils going to biofuels, and they fall short every single time.
• 3:25
  SPEAKER_00: This is clearly not good for U.S.
• 3:28
  SPEAKER_00: bean oil prices.
• 3:29
  SPEAKER_00: This is also not good longer term for U.S.
• 3:32
  SPEAKER_00: crush margins.
• 3:34
  SPEAKER_00: We discussed how big crush margins are supportive to U.S.
• 3:38
  SPEAKER_00: soybean prices.
• 3:39
  SPEAKER_00: Declining bean oil prices slowly and eventually push crush margins lower and lower.
• 3:45
  SPEAKER_00: And that eventually eats away at underlying support for bean prices.
• 3:50
  SPEAKER_00: In the near term, I see very limited upside for soybean prices.
• 3:55
  SPEAKER_00: But for us to break much more, we need these big crush margins going down.
• 3:59
  SPEAKER_00: Yes, we're eating away at those, but not very fast.
• 4:03
  SPEAKER_00: So near term, steady to maybe a little lower.
• 4:07
  SPEAKER_00: Longer term, we need to be watching this weather in South America, which is really good so far.
• 4:13
  SPEAKER_00: As far as weather goes, we've got a pretty decent rain event from Texas all the way up into Kansas, Nebraska, and over into Iowa and Missouri the next several days, and then it just kind of slowly drifts east after that.
• 4:30
  SPEAKER_00: Maybe this slows down a little bit of harvest, but you know, most of the harvest is behind us by now anyway.
• 4:37
  SPEAKER_00: The really bigger story for weather is South America.
• 4:40
  SPEAKER_00: Um Argentina has got good soil moisture and they continue to get light-scattered rains that you know is just ideal for what they need right now, being is in the middle of planting season for corn and starting the planting season for beans.
• 4:54
  SPEAKER_00: In Brazil, Paraná is still the focus.
• 4:57
  SPEAKER_00: Most of the country of Brazil that grows soybeans has got good soil moisture and planting paces ahead of average.
• 5:04
  SPEAKER_00: But Paramna is really the big question mark.
• 5:07
  SPEAKER_00: They get a break from or they've had a break from rains this week, but if we look out middle, late part of next week, they're getting slammed in slammed again with big rains.
• 5:21
  SPEAKER_00: They need a break from rains.
• 5:22
  SPEAKER_00: That's just that's just too wet.
• 5:24
  SPEAKER_00: So anyway, we need to keep watching that.
• 5:27
  SPEAKER_00: But overall, big picture of South America, they're really good.
• 5:31
  SPEAKER_00: Uh moisture and really good weather.
• 5:34
  SPEAKER_00: Paranot is really the only place in Brazil that's a question mark today.
• 5:38
  SPEAKER_00: That's it for today.
• 5:39
  SPEAKER_00: Thanks for listening.
• 5:40
  SPEAKER_00: We'll be back tomorrow.