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Transcript

Daily Market Podcast Oct 30 · 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 Friday morning, October 30th.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is down one and three quarters at 449 and a quarter.
• 0:12
  SPEAKER_00: November soybeans down one and a half at 12.18 and a quarter.
• 0:16
  SPEAKER_00: December meal is down 90 cents at 328.40.
• 0:21
  SPEAKER_00: And if we look at meal, that's actually the lowest trade that we've had in meal in a solid two months now.
• 0:30
  SPEAKER_00: And December crude is up$2 again this morning at an even$104 a barrel.
• 0:37
  SPEAKER_00: All right, as far as corn news goes, the two words of the day are Chinese rumors.
• 0:42
  SPEAKER_00: There was talk yesterday that China was in asking for quotes on both U.S.
• 0:47
  SPEAKER_00: corn and wheat.
• 0:48
  SPEAKER_00: Does that mean that China is close to buying U.S.
• 0:51
  SPEAKER_00: grains?
• 0:51
  SPEAKER_00: Who knows?
• 0:52
  SPEAKER_00: Typically the market would shoot first and ask questions later, especially when it comes to anything relating to China.
• 0:58
  SPEAKER_00: But it does appear that the market this morning is not assuming that this means anything.
• 1:03
  SPEAKER_00: Corn is down two cents and wheat is up two cents.
• 1:06
  SPEAKER_00: So a big whopping nothing.
• 1:08
  SPEAKER_00: So far this year, the market has been disappointed over and over with export demand going to China.
• 1:14
  SPEAKER_00: But if China was considering buying U.S.
• 1:18
  SPEAKER_00: corn andor wheat, the U.S.
• 1:21
  SPEAKER_00: is prices right now are the most expensive in the world for both commodities.
• 1:26
  SPEAKER_00: So the only reason that China would actually buy U.S.
• 1:29
  SPEAKER_00: grains would be to play buddy buddy with Trump to influence some other trade issues.
• 1:34
  SPEAKER_00: And we have no way of forecasting that thing.
• 1:37
  SPEAKER_00: Meanwhile, in Argentina, corn planting progress is crazy fast.
• 1:41
  SPEAKER_00: As of yesterday, corn planting in Argentina was 47% complete, a full six weeks ahead of average, and by far the fastest in our 40 plus years of planting data.
• 1:54
  SPEAKER_00: And that crop has good soil moisture, and we're told it's being treated very well.
• 1:58
  SPEAKER_00: Argentina produces over one half of its own urea that it needs annually, and we're told that this crop is getting all the fertilizer it should have.
• 2:08
  SPEAKER_00: So we continue the thing, the theme of big global corn supplies, and CBOT corn continues to slide lower.
• 2:16
  SPEAKER_00: Yes, we have a long growing season ahead of us in South America, but if their crops are good and U.S.
• 2:22
  SPEAKER_00: export demand continues to be stinko, there is certainly a case to be made for CBOT corn for March and May and July futures to all eventually trade 425 or lower.
• 2:37
  SPEAKER_00: As far as soybeans go, um CBOT beans and meal both continue to slip slide lower.
• 2:44
  SPEAKER_00: South American meal prices are breaking, and that kicks U.S.
• 2:48
  SPEAKER_00: meal export demand right in the gut.
• 2:50
  SPEAKER_00: As a point of reference, for Brazilian new crop, which would be February, March time period, for those export meals prices out of Brazil, they are$35 a ton cheaper than U.S.
• 3:04
  SPEAKER_00: Gulf this morning.
• 3:06
  SPEAKER_00: That is not good very good for the home team.
• 3:08
  SPEAKER_00: Meanwhile, Argentina's soybean planting is just beginning.
• 3:12
  SPEAKER_00: I've got a chart of that on the bottom of page one.
• 3:14
  SPEAKER_00: Soybean area in Argentina is expected to be up slightly from last year.
• 3:19
  SPEAKER_00: In Brazil, the currency continues to be weak following Lula's election.
• 3:24
  SPEAKER_00: And that certainly points to more cash in the hands of Brazilian farmers and likely larger soybean planted area.
• 3:31
  SPEAKER_00: The state of Paraná in southern Brazil is still too wet.
• 3:35
  SPEAKER_00: On our weather maps on page three this morning, you can see that they are just soaking wet going forward.
• 3:41
  SPEAKER_00: But other areas in Brazil are in very good shape for soil moisture.
• 3:46
  SPEAKER_00: If we shift over to China, soybean crush margins continue to be negative, and hog futures in China hit new contract close yesterday.
• 3:54
  SPEAKER_00: We're told that hog margins in China are horrible, and their hog industry is in the middle of liquidating animals and getting smaller.
• 4:01
  SPEAKER_00: So conceivably meal demand should uh should be getting smaller, not getting bigger.
• 4:07
  SPEAKER_00: So the end result of all of this is limited upside for CBOT soybeans and meal, and as long as crops are okay in South America, we expect soybean meal prices to trade steady to lower.
• 4:30
  SPEAKER_00: The average guess for September placements going into U.S.
• 4:33
  SPEAKER_00: feedlots was down 8% from a year ago, but when USDA's report came out, actual placements were even smaller, down 12%.
• 4:42
  SPEAKER_00: The number of cattle marketed out of feedlots in September was bigger than expected.
• 4:48
  SPEAKER_00: So this report was bullish both for the near term and longer term.
• 4:52
  SPEAKER_00: And let's not overlook the fact that cashed cattle in uh both in the north and the south traded higher last Friday.
• 5:00
  SPEAKER_00: So CME cattle opened higher on Monday, as it should have, and then collapsed.
• 5:05
  SPEAKER_00: It certainly feels like this is some massive fund group liquidating longs, but we don't hear of any big liquidation and open interest has not gone down.
• 5:13
  SPEAKER_00: I have to admit, this is one of those times when the cattle market is behaving very strangely.
• 5:19
  SPEAKER_00: Yes, I have made the case that rallies right now may not hold in cattle, but I did not expect CMA cattle futures to drop$7 from the high tick on Monday to the close yesterday.
• 5:33
  SPEAKER_00: Meanwhile, beef imports into the U.S.
• 5:36
  SPEAKER_00: remain big, and we expect a huge import program to continue well into 2027.
• 5:42
  SPEAKER_00: There is plenty of beef around the world and U.S.
• 5:44
  SPEAKER_00: prices are the highest.
• 5:46
  SPEAKER_00: This is especially the case relating to both Brazil and Mexico, plenty of beef in both areas.
• 5:51
  SPEAKER_00: And now that Lulo won the presidential election, we expect Brazil to lobby the U.S.
• 5:57
  SPEAKER_00: for reduced tariffs on all products coming into the U.S.
• 6:01
  SPEAKER_00: If that happens, they will certainly push for lower beef tariffs.
• 6:06
  SPEAKER_00: We need to watch this one.
• 6:08
  SPEAKER_00: As you can see on the chart on the bottom of page two, beef prices have remained mostly flat for the last month and a half.
• 6:17
  SPEAKER_00: Seasonally, they should continue to be flat to the end of the year.
• 6:20
  SPEAKER_00: Beef prices typically rally beginning in January all the way through the end of March.
• 6:26
  SPEAKER_00: But with so many more beef imports, that rally may be muted.
• 6:31
  SPEAKER_00: I'm still in the opinion that rallies in cattle and feeders in the near term will be limited.
• 6:37
  SPEAKER_00: Longer term, we're headed towards some very small cattle numbers next spring.
• 6:42
  SPEAKER_00: By April, I believe that U.S.
• 6:44
  SPEAKER_00: cattle and feed numbers will be down at least 3% year over year.
• 6:48
  SPEAKER_00: And that would be the smallest cattle numbers in over 10 years.
• 6:52
  SPEAKER_00: But we may also have to deal with more beef imports.
• 6:56
  SPEAKER_00: We've remained cautiously bullish for 2027.
• 7:00
  SPEAKER_00: As far as weather, it continues look like the western half, the central and western corn belt, uh is going to get a pretty good dose of showers the next several days.
• 7:11
  SPEAKER_00: And then next week it looks like light scattered rains.
• 7:16
  SPEAKER_00: Brazil is really the hot spot that we need to watch again.
• 7:19
  SPEAKER_00: And it's all focused on the state of Paraná.
• 7:22
  SPEAKER_00: Everybody else is doing great for moisture.
• 7:24
  SPEAKER_00: Paraná is way too wet.
• 7:26
  SPEAKER_00: Uh, and planning is going to continue to be something slower than normal.
• 7:32
  SPEAKER_00: That's it for uh the report this morning.
• 7:34
  SPEAKER_00: Y'all have a great weekend.
• 7:36
  SPEAKER_00: We'll be back on Monday.