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Transcript

Daily Market Podcast Jul 10 · M6 Capital Daily Market Podcast

0:00
SPEAKER_00: Good morning.
0:01
SPEAKER_00: This is Chris Myers with M6 Capital Management.
0:03
SPEAKER_00: On Friday morning, July 10th, we're on the Daily Market Letter.
0:07
SPEAKER_00: Walking in this morning, December corn is down four and a quarter at 447 and three quarters.
0:12
SPEAKER_00: November soybeans are down four at 11.77 and a half.
0:17
SPEAKER_00: August crude is up 40 cents at 72.40.
0:21
SPEAKER_00: First thing this morning, USDA has got uh its Wise D report today.
0:26
SPEAKER_00: They'll issue that at 11 o'clock uh Central Time this morning.
0:31
SPEAKER_00: And this is their monthly report where they make changes to global supply demand estimates for grains and particularly with U.S.
0:38
SPEAKER_00: supply-demand estimates, and they will also have to incorporate the stocks and acreage estimates from the end of June into this report.
0:47
SPEAKER_00: The average market guesses are listed on the bottom of page one.
0:52
SPEAKER_00: As for corn news this morning, uh in the report today, it will be interesting to see if USDA makes any changes to their EU corn production estimate.
1:01
SPEAKER_00: Recent crop numbers out of France have that corn crop down at least 40% from last year.
1:08
SPEAKER_00: Part of that is a smaller area, but most of that is simply a bad yield.
1:12
SPEAKER_00: Weather in the EU remains hot and dry, particularly over Spain, France, uh into Germany, and most of Italy.
1:20
SPEAKER_00: As for the U.S.
1:21
SPEAKER_00: numbers in the USDA report today, uh they have to increase corn demand for animal feeding, given that they had a small June stocks, corn stocks number last week.
1:34
SPEAKER_00: I am also firmly in the camp that USDA is still way too low on corn exports, but it's anybody's guess if they adjust numbers on this report or not.
1:44
SPEAKER_00: So, net net, I will not be shocked if USDA's estimate for ending stocks comes in smaller than the average market guess.
1:53
SPEAKER_00: As for U.S.
1:54
SPEAKER_00: weather, the models still show a high pressure system over Kansas, Nebraska early next week, but then it retrogrades back west early the following week, but they're forecaster models, and we simply don't know what the models will show when we walk in on Monday morning.
2:11
SPEAKER_00: So we could be in for another several days of knee-jerking back around.
2:16
SPEAKER_00: I remain firmly in the camp that CBOT corn has much more upside than downside from here.
2:23
SPEAKER_00: As for soybeans, CBOT soybeans sold off quite a bit yesterday, but meal actually firmed up several dollars.
2:31
SPEAKER_00: This rally in meal relates to Argentina.
2:34
SPEAKER_00: Farmers in Argentina are very slow selling their soybeans, they're selling other crops for cash instead.
2:40
SPEAKER_00: This has pushed crush margins in Argentina into the negative.
2:44
SPEAKER_00: Some crushers in Argentina have already slowed down their crush pace.
2:48
SPEAKER_00: So the CBOT meal market is trying to figure out if the U.S.
2:53
SPEAKER_00: will get any additional export meal business from the slower crush pace and therefore the slower meal export pace out of Argentina.
3:03
SPEAKER_00: As for China, they bought another few cargoes of U.S.
3:06
SPEAKER_00: beans on Wednesday and several more on Thursday.
3:09
SPEAKER_00: The Chinese crush pace, um, soybean crush has been running up five to five to six percent from a year ago levels.
3:18
SPEAKER_00: And China is not just buying from the U.S., they're also buying from Brazil, also.
3:23
SPEAKER_00: This feels like China is just buying from whoever is the cheapest for whatever time period.
3:30
SPEAKER_00: It does not feel like China is in the mode trying to buy 25 million tons of U.S.
3:35
SPEAKER_00: beans to fulfill their obligations.
3:38
SPEAKER_00: As for the USG report today, I don't believe that really I don't believe the report will really be much of a market factor.
3:46
SPEAKER_00: I still think that longer term it's hard to be bullish.
3:50
SPEAKER_00: Soybean prices, rallies are to be sold.
3:53
SPEAKER_00: As for meal, we need to watch this crush situation in Argentina.
3:57
SPEAKER_00: Moving on to cattle, we now have 34 cases of New World Screwworm in the United States.
4:04
SPEAKER_00: Uh, I've got a map on the top of page two.
4:08
SPEAKER_00: Um, and most so far, every case, not most, but every case has been domestic animals, mostly cattle, some sheep, a few goats, and a few dogs.
4:20
SPEAKER_00: We have to believe that there are many more cases in wildlife that have not been found yet.
4:27
SPEAKER_00: As for CMB cattle futures, we have seen prices collapse over the last three weeks.
4:32
SPEAKER_00: This is a combination of multiple reasons.
4:35
SPEAKER_00: Uh, number one, we have lots of heavy cattle that need to be marketed and they are not hedged.
4:41
SPEAKER_00: Um, this large number two, this large speculator had massive long positions in CME cattle.
4:49
SPEAKER_00: And number three, at the same time, we are seeing retailers and food service companies in the U.S.
4:56
SPEAKER_00: incorporating more and more imported beef into their product lines.
5:00
SPEAKER_00: Some is coming from Australia, lots is coming from Brazil, and an increasing amount is coming in from Mexico.
5:08
SPEAKER_00: So, in the first chart on the bottom of page two, we have cash prices and upcoming futures prices for August stock and these futures.
5:18
SPEAKER_00: Clearly, the nearby August live cattle futures are way below last week's 253 cash.
5:26
SPEAKER_00: It seems like we'll likely trade 248 this week, and we won't be surprised if we trade closer to 240 to 242 next week.
5:34
SPEAKER_00: Feed yards that have been putting more and more and more weight on cattle are now shifting into a mode of trying to get rid of cattle as fast as they can.
5:42
SPEAKER_00: Many of these cattle are not hedged, and breaking$10 plus dollars in the last two weeks gets to be pretty painful.
5:50
SPEAKER_00: In the second chart below, uh on the bottom of page two, we have U.S.
5:55
SPEAKER_00: beef trade.
5:56
SPEAKER_00: Um, U.S.
5:57
SPEAKER_00: beef is by far the highest priced beef in the world, and thus our exports have gotten smaller, imports have gotten bigger, and the chart below is net imports, and those net imports are now almost 15% of monthly U.S.
6:15
SPEAKER_00: beef consumption.
6:17
SPEAKER_00: That's huge.
6:18
SPEAKER_00: To just two years ago, that number was only 2 or 3%.
6:21
SPEAKER_00: So we're seeing more grocery stores carrying import beef.
6:25
SPEAKER_00: The food service industry is a different deal.
6:27
SPEAKER_00: It's been harder to break into that industry for imported beef because they are hugely focused on reliable supply and consistent quality.
6:37
SPEAKER_00: The last several months, the food service industry has come around and now they are using more and more imported beef at prices that is much cheaper than U.S.
6:47
SPEAKER_00: beef.
6:48
SPEAKER_00: So, in both the near term and the long term, rallies in CME live cattle are to be sold.
6:54
SPEAKER_00: Feeder prices should remain firm due to lacking supplies.
6:58
SPEAKER_00: We've discussed that for months.
7:00
SPEAKER_00: And cattle feeding margins, therefore, are very likely not going to be good moving forward, and they may not be good for a long time.
7:10
SPEAKER_00: Moving on to weather, we've got uh you can see on the radar this morning, we've got this system uh just north of Memphis.
7:16
SPEAKER_00: Looks like it's gonna be moving east the next couple of days.
7:19
SPEAKER_00: Once we get past that, it looks like we've got open weather for the next 10 plus days, uh, particularly in the heart of the Corn Belt, and temperatures are going to be well above normal, uh, particularly in the plain states.
7:34
SPEAKER_00: That's it for today.
7:35
SPEAKER_00: Thanks for listening.
7:36
SPEAKER_00: Y'all have a good weekend.
7:37
SPEAKER_00: We'll be back on Monday.