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Transcript

Daily Market Podcast Jul 14 · 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, July 14th.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is down five and three quarters at 457 and a quarter.
• 0:11
  SPEAKER_00: November beans are down seven and a quarter at 1187 and a quarter.
• 0:16
  SPEAKER_00: Sorry.
• 0:17
  SPEAKER_00: And August crude is up$1.80 at$80 even walking in this morning.
• 0:24
  SPEAKER_00: A lot to discuss with corn and beans this morning.
• 0:28
  SPEAKER_00: First off, let's start with corn.
• 0:30
  SPEAKER_00: USDA's weekly crop progress report yesterday increased the U.S.
• 0:34
  SPEAKER_00: corn crop rating.
• 0:36
  SPEAKER_00: And you can see I've got charts on the bottom of page one with both corn and bean condition ratings.
• 0:44
  SPEAKER_00: Crop ratings went up in Kentucky, Ohio on the east, in Colorado and North Dakota on the west.
• 0:51
  SPEAKER_00: Most other states were unchanged or had small changes.
• 0:54
  SPEAKER_00: The U.S.
• 0:54
  SPEAKER_00: corn crop was 30 is 34% silking, that's 4% ahead of average, and 5% in a dough stage, which is 1% ahead of average.
• 1:05
  SPEAKER_00: And as you can see in the chart on page one, the national corn condition rating typically goes down 1% a week.
• 1:14
  SPEAKER_00: This week we went up one.
• 1:16
  SPEAKER_00: And with the upcoming dryness and heat for next week, we fully expect next week's crop condition rating to go right back down.
• 1:24
  SPEAKER_00: Why do we care?
• 1:26
  SPEAKER_00: Well, there are so many people in this market.
• 1:29
  SPEAKER_00: Got analysts, grain trading firms, you name it, that use these condition ratings from week to week to forecast final grain yields.
• 1:38
  SPEAKER_00: So yesterday told them the corn crop was getting bigger, and we expect next week to show just the opposite.
• 1:45
  SPEAKER_00: Corn crop getting smaller.
• 1:47
  SPEAKER_00: That makes for a lot of confusion and volatility.
• 1:50
  SPEAKER_00: But we also need to talk about China.
• 1:54
  SPEAKER_00: People far better connected in Washington, D.C.
• 1:57
  SPEAKER_00: than I am, tell me it is a 100% chance that China buys$17 billion worth of USA goods that was agreed to in April.
• 2:08
  SPEAKER_00: But we don't know about the timing.
• 2:10
  SPEAKER_00: Sometime before the end of the year.
• 2:20
  SPEAKER_00: CBOT corn market is not trading like China will buy anything.
• 2:26
  SPEAKER_00: With China, well, certainly not corn and wheat.
• 2:31
  SPEAKER_00: With China already buying corn from Argentina, it's logical to assume that they will buy U.S.
• 2:35
  SPEAKER_00: corn earlier rather than later.
• 2:37
  SPEAKER_00: But who knows?
• 2:38
  SPEAKER_00: When it comes to China, there's so many other things in play.
• 2:41
  SPEAKER_00: Um, political items such as Taiwan, okay.
• 2:45
  SPEAKER_00: But I want to make this point very clear.
• 2:49
  SPEAKER_00: If and when China comes in buying U.S.
• 2:52
  SPEAKER_00: corn, and assuming we're right, and it's going to be eight to ten million tons a year, then this corn market gets wildly bullish.
• 3:02
  SPEAKER_00: If you float through the math, and you the U.S.
• 3:05
  SPEAKER_00: ending stocks will become very small, and the corn market will need to buy more corn acres next year in 2027.
• 3:16
  SPEAKER_00: This thing, point point I'm trying to make here, is if and when China shows up, the$17 billion is not a one-year deal.
• 3:23
  SPEAKER_00: It's a three-year deal.
• 3:25
  SPEAKER_00: They do it three years in a row.
• 3:27
  SPEAKER_00: This thing could be bullish for quite a while.
• 3:31
  SPEAKER_00: So I won't.
• 3:34
  SPEAKER_00: So I think there will be some point in the near future when we look back and we see this random bouncing around that the corn market seems to be doing right now as random noise.
• 3:44
  SPEAKER_00: And CBOT corn prices will be much, much higher.
• 3:49
  SPEAKER_00: But again, timing is the biggest question regarding China.
• 3:53
  SPEAKER_00: Moving on to soybeans, USDA's soybean condition ratings also increased 1% yesterday.
• 3:59
  SPEAKER_00: And as you can see in the chart on the bottom of page one, it is normal this time of year for condition ratings to go down a half to one point a week.
• 4:07
  SPEAKER_00: U.S.
• 4:08
  SPEAKER_00: uh corn, U.S.
• 4:09
  SPEAKER_00: sorry, soybean crop is 50% blooming, that's six points ahead of average, and 19% of the crop is setting pods, that is six points ahead of average.
• 4:21
  SPEAKER_00: CBOT soybeans right now are being pulled in so many different directions.
• 4:27
  SPEAKER_00: We have multiple questions that have big implications for the direction of the market.
• 4:32
  SPEAKER_00: Number one, whether this week is warm and dry, will condition ratings for soybeans go back down next week?
• 4:39
  SPEAKER_00: Number two, how many U.S.
• 4:42
  SPEAKER_00: soybeans will China buy?
• 4:44
  SPEAKER_00: Number three, how much will crude oil rally and pull bean oil with it?
• 4:48
  SPEAKER_00: Number four, will U.S.
• 4:50
  SPEAKER_00: meal exports remain small, or will this slow farmer selling in Argentina and therefore the slow crush rate force some meal export business back to the U.S.
• 5:01
  SPEAKER_00: Any of these can add volatility on any given day.
• 5:05
  SPEAKER_00: We remain longer-term bearish uh CBOT soybeans, but we have to believe that there will be a bigger rally and a better chance to sell.
• 5:14
  SPEAKER_00: Moving on to weather.
• 5:16
  SPEAKER_00: Uh again, the next several days is basically going to be dry in the corn belt and very warm, particularly in the plain states.
• 5:24
  SPEAKER_00: Uh, we do have a system that in the next several days coming across uh Tennessee, Mississippi, Alabama, Georgia areas.
• 5:31
  SPEAKER_00: Beyond that, really not much moisture in grain-producing areas over the next 10 days.
• 5:38
  SPEAKER_00: High temperatures this week, and I've got uh maps for tomorrow and uh the next day, high temperatures are supposed to be uh well up into the hundreds uh in South Dakota, parts of southern uh North Dakota, and 90s uh throughout the plain states and above normal temperatures basically throughout the rest of the country.
• 6:04
  SPEAKER_00: The at the bottom of page three, if you get a chance, please take a look at this.
• 6:09
  SPEAKER_00: I've got uh maps of where the high pressure sits today, which is uh basically over uh the state of Iowa, and that's where it's sitting this morning, and by next Tuesday, it has retrograded and is back over the Four Corners area, which is kind of normal for this time of year for it to be out over there.
• 6:31
  SPEAKER_00: So uh that's our forecast going forward for weather, is that as a high pressure moves back west, at some point uh late next week and beyond, it should allow more rainfall back into the corn belt and potentially cooler temperatures.
• 6:48
  SPEAKER_00: Uh, but again, that's a week out.
• 6:51
  SPEAKER_00: Thanks for listening.
• 6:52
  SPEAKER_00: We'll be back tomorrow.