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Daily Market Podcast Oct 7 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: It's Chris Myers with M6 Capital Management with our daily market letter on Wednesday morning, October 7th.
• 0:08
  SPEAKER_00: Walking in this morning, De Summer Corn is down four and a half at 403 and three quarters.
• 0:13
  SPEAKER_00: November beans are down a penny at 13.02.
• 0:16
  SPEAKER_00: December meal is up 70 cents at 355.50.
• 0:21
  SPEAKER_00: And November crude is up 50 cents at 89.90.
• 0:27
  SPEAKER_00: Today I want to focus on longer-term thoughts.
• 0:31
  SPEAKER_00: Um, with this big USDA report coming on Friday, markets are just kind of bouncing around the last several days, not really doing a lot.
• 0:39
  SPEAKER_00: So I figured this would be a good time to focus on the longer-term potential for these markets.
• 0:44
  SPEAKER_00: As far as corn goes, global corn demand is still good, but the U.S.
• 0:49
  SPEAKER_00: is getting a smaller and smaller share of that export business.
• 0:54
  SPEAKER_00: Argentine and Brazilian corn remains cheaper than U.S.
• 0:58
  SPEAKER_00: Gulf, with Argentine corn by far the cheapest origin in the world.
• 1:03
  SPEAKER_00: Longer term, it certainly looks like U.S.
• 1:06
  SPEAKER_00: corn export demand declines.
• 1:09
  SPEAKER_00: There is plenty of cheaper corn in South America.
• 1:13
  SPEAKER_00: So once again, the longer term outlook for CBOT corn comes down to supplies.
• 1:19
  SPEAKER_00: South America corn crop planning is going really good, so no issues there currently.
• 1:25
  SPEAKER_00: So that just leaves the U.S.
• 1:27
  SPEAKER_00: The USD crop report on Friday will play a huge role in determining the longer-term direction of CBOT corn.
• 1:34
  SPEAKER_00: If USD only cuts the U.S.
• 1:36
  SPEAKER_00: corn yield by one half to one bushel, as we expect them to, um, and as the seed yield data is certainly applying to us, then CBOT corn is headed lower.
• 1:50
  SPEAKER_00: If we get further into the corn growing season in South America and it's going well, we could easily see CBOT corn back under 450.
• 2:00
  SPEAKER_00: As far as soybeans go, um, I've got a chart on the bottom of page one that is combined crush uh of Brazil and Argentina by month.
• 2:13
  SPEAKER_00: And for years and years, Argentina has had way too much crush capacity, and they really didn't realize that capacity.
• 2:22
  SPEAKER_00: They didn't utilize it all.
• 2:23
  SPEAKER_00: Either they didn't have the soybean crop or crush margins just were not that good.
• 2:29
  SPEAKER_00: The last several months, they have been running over 90% of capacity.
• 2:33
  SPEAKER_00: Um, Brazil is steadily adding more crush capacity.
• 2:38
  SPEAKER_00: Um, current capacity is up 13% from a year ago.
• 2:43
  SPEAKER_00: So, longer term, if South America has a decent crop uh that they harvest in early 27, then they will crush more and more and they will completely dominate global meal trade.
• 2:57
  SPEAKER_00: Um you'll see on the chart, um, again, this chart on the bottom of page one, that very rarely in previous years um have combined Brazil and Argentina crush ever been over nine million tons per month.
• 3:17
  SPEAKER_00: But they have now done that for four months in a row.
• 3:22
  SPEAKER_00: Um if you look at total capacity, what what if they what could they really get going?
• 3:30
  SPEAKER_00: They have capacity uh uh to crush over 10 million tons a month.
• 3:34
  SPEAKER_00: So in the longer term picture, why why do we care?
• 3:39
  SPEAKER_00: Well, U.S.
• 3:40
  SPEAKER_00: Crush is expanding, obviously, uh to supply veg oils for biofuels here in the US.
• 3:48
  SPEAKER_00: And with the expanding crush in South America, that means that meal in the U.S.
• 3:54
  SPEAKER_00: will become a problem.
• 3:56
  SPEAKER_00: At some point in 2027, uh, likely after you harvest the crops in South America, meal prices will need to go to whatever low level it takes to just get rid of it.
• 4:09
  SPEAKER_00: Meal becomes a problem.
• 4:11
  SPEAKER_00: U.S.
• 4:11
  SPEAKER_00: meal export business will be very small.
• 4:14
  SPEAKER_00: So the reason I mention all this, this is one more item that is absolutely not bullish for the longer-term outlook for soybeans.
• 4:25
  SPEAKER_00: Um, again, longer term, if the crops are okay in South America and they have plenty of beans to export, plenty of beans to crush, CBFT soybean prices are headed lower, likely under$12, which would be well over a dollar break from the current levels.
• 4:43
  SPEAKER_00: Point I'm trying to make here is we need some crop issue in South America to hold prices at current levels, much less be bullish.
• 4:52
  SPEAKER_00: We need a crop problem just to hold prices where they are.
• 4:56
  SPEAKER_00: So without that, longer term, CBFT swimming prices are headed lower.
• 5:02
  SPEAKER_00: As far as weather, the one to five day looks like it's gonna just again be wide open from Texas to North Dakota and over into Missouri, Illinois, Iowa, Minnesota, Wisconsin.
• 5:19
  SPEAKER_00: Harvest progress should just be blowing and going.
• 5:22
  SPEAKER_00: And next week you've got uh looks like decent rains in parts of Kansas and Missouri, but the rest of the corn belt looks like they will be making big progress next week, also.
• 5:33
  SPEAKER_00: So um corn harvest and bean harvest are slightly behind average, and we should pick that up pretty quickly.
• 5:40
  SPEAKER_00: Um, South American weather that we've talked about quite a bit in the last several weeks.
• 5:44
  SPEAKER_00: Uh you've got better rains, seasonal rains showing up in Mato Grosso and areas around Mato Grosso, Brazil, which means they, you know, farmers are going to be blowing and going on planting because the seasonal rain showed up.
• 5:56
  SPEAKER_00: Paranas remains wet, but not a that's just not a problem today.
• 6:01
  SPEAKER_00: Their planting is super fast already.
• 6:04
  SPEAKER_00: And uh you've got quite good rains uh forecast over the next 10 days in Argentina, um, to the tune of you know one and a half to two inch amounts.
• 6:14
  SPEAKER_00: So, and there and we've already been talked about their corn planting is the fastest in well over 20 years.
• 6:20
  SPEAKER_00: So, net net South America weather is really in good shape today.
• 6:26
  SPEAKER_00: So, no issues there.
• 6:28
  SPEAKER_00: That's it for today.
• 6:29
  SPEAKER_00: Thanks for listening.
• 6:30
  SPEAKER_00: We'll be back tomorrow.