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Daily Market Podcast Jun 5 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers with M6 Capital Management on Friday, June 5th with our daily market letter.
• 0:08
  SPEAKER_00: Walking in this morning, December corn is down 3.5 at 448.5.
• 0:12
  SPEAKER_00: November beans are down three quarters at 11.40 and a half.
• 0:16
  SPEAKER_00: July crude is down 30 cents at 92.70.
• 0:19
  SPEAKER_00: Um, we got a lot to talk about today.
• 0:22
  SPEAKER_00: Uh, first off, some trade issues with the U.S.
• 0:25
  SPEAKER_00: Um, yesterday the U.S.
• 0:26
  SPEAKER_00: trade representative proposed some new tariffs, some Section 301 tariffs, uh, ranging from 10% to 12.5% on imports uh coming from China and nearly 60 other 60 other countries due to those nations uh failing to prohibit or failing to enforce bans on goods made by forced labor, by slave labor.
• 0:53
  SPEAKER_00: So, with potentially new tariffs coming on Chinese goods, now the market has several questions.
• 1:01
  SPEAKER_00: First off, how will this affect the potential Chinese buying uh U.S.
• 1:06
  SPEAKER_00: grains under this$17 billion deal from a month and a half ago?
• 1:13
  SPEAKER_00: And how will this affect the$25 million ton soybean deal?
• 1:17
  SPEAKER_00: As for the$17 billion deal, that was in conjunction with Trump lowering tariffs on Chinese fentanyl.
• 1:24
  SPEAKER_00: And that was worth$30 billion to China, the lower tariffs.
• 1:28
  SPEAKER_00: So China spends$17 billion to get$30 billion return and also get some raw commodities.
• 1:35
  SPEAKER_00: Seems like China comes out way ahead on that one.
• 1:39
  SPEAKER_00: Also, um, what does China have to do to drop these tariffs?
• 1:44
  SPEAKER_00: We don't know.
• 1:46
  SPEAKER_00: Uh the U.S.
• 1:48
  SPEAKER_00: agreed in November to for a 12-month time period, there was gonna be no new tariffs on China.
• 1:54
  SPEAKER_00: Does that still hold true?
• 1:56
  SPEAKER_00: We don't know.
• 1:57
  SPEAKER_00: Hopefully we can learn more in coming days, but the green markets are gonna be ultra sensitive to this.
• 2:03
  SPEAKER_00: Also, uh, second is U.S.
• 2:06
  SPEAKER_00: energy stocks, uh, fuel stocks are getting quite low.
• 2:10
  SPEAKER_00: Uh, I've got charts at the bottom of page one, and this chart is the cumulative stocks of U.S.
• 2:16
  SPEAKER_00: crude oil, gasoline, and distillates, which is diesel and heating oil.
• 2:21
  SPEAKER_00: Uh, stocks today are the lowest they've been in over 10 years on this date.
• 2:26
  SPEAKER_00: So, irregardless if the straight over moves is open or not, you've got to wonder, does this keep fuel prices high in the U.S.
• 2:34
  SPEAKER_00: for quite a while?
• 2:35
  SPEAKER_00: All right, so moving on to corn, we continue to get more liquidation in CBOT corn.
• 2:41
  SPEAKER_00: Just three weeks ago, speculators were long over 350,000 contracts of corn.
• 2:47
  SPEAKER_00: Today, their long is somewhere in the neighborhood of 140,000.
• 2:51
  SPEAKER_00: So for now, we continue to slip slide lower.
• 2:54
  SPEAKER_00: Speculators are getting out.
• 2:57
  SPEAKER_00: Uh, and the new news on these potential tariffs on Chinese goods is not helping the cause.
• 3:04
  SPEAKER_00: Meanwhile, corn prices in Europe are uh up at several year highs.
• 3:09
  SPEAKER_00: Corn import margins are huge in Europe, and their uh import demand will be quite large this year.
• 3:15
  SPEAKER_00: Corn acres this season in Europe are the smallest in over 10 years, and the weather so far has been hot and dry, and the forecast is for more of the same.
• 3:24
  SPEAKER_00: As for U.S.
• 3:25
  SPEAKER_00: sales, uh U.S.
• 3:26
  SPEAKER_00: outstanding corn export sales are a massive 19 million tons today.
• 3:32
  SPEAKER_00: That's the biggest they've ever been on this date.
• 3:34
  SPEAKER_00: So U.S.
• 3:35
  SPEAKER_00: corn export business should remain big for a long time.
• 3:39
  SPEAKER_00: In the near term, the path to least resistance is lower until these speculators get out of more of their longs.
• 3:45
  SPEAKER_00: As for soybeans, the soybean market took a nosedive yesterday following this tariff news on China.
• 3:52
  SPEAKER_00: Market took a shoot first, ask questions later attitude.
• 3:55
  SPEAKER_00: At this point, the market needs some clarity on China on multiple items.
• 4:00
  SPEAKER_00: Meanwhile, U.S.
• 4:01
  SPEAKER_00: meal export sales are slowing down.
• 4:03
  SPEAKER_00: Outstanding meal sales, that's meal that is sold but not yet shipped, is still at a record large level, but new sales pace is slowing down quite a bit.
• 4:13
  SPEAKER_00: It seems that some crushers are extending their maintenance downtime right now.
• 4:19
  SPEAKER_00: Maybe they see the writing on the wall and meal export business slowing down, and that U.S.
• 4:25
  SPEAKER_00: meal supplies will loosen up some, and they're trying their best to delay that.
• 4:30
  SPEAKER_00: Also, we should note that with the wide margins on in the renewable diesel world, U.S.
• 4:36
  SPEAKER_00: imports of biofuels and imports of feedstock of uh used cooking oil, cheap Malaysian palm oil, and whatnot, have increased a lot.
• 4:46
  SPEAKER_00: I don't think this is bearish bean oil, but it may tamper some of the bullishness there.
• 4:51
  SPEAKER_00: All right, on to cattle news.
• 4:53
  SPEAKER_00: Uh obviously, yesterday we all saw the news that we had gotten this new world screw worm in the U.S.
• 5:00
  SPEAKER_00: So the main question here is how does this case of New World Screwworm affect our cattle market?
• 5:06
  SPEAKER_00: Well, yesterday, CME futures did not break like I feared.
• 5:11
  SPEAKER_00: Uh, interesting enough, Packers came out early bidding cash, uh cash cattle the same as they did a week ago.
• 5:19
  SPEAKER_00: That was a huge factor yesterday and a huge uh uh deal supporting the market.
• 5:24
  SPEAKER_00: But I think as far as New Orleans screwworm, we have to look at this from multiple perspectives.
• 5:30
  SPEAKER_00: First, how will the U.S.
• 5:32
  SPEAKER_00: consumer react?
• 5:33
  SPEAKER_00: If we look back at cases of mad cow or bird flu, the answer to that question uh was that consumers backed away from whatever item was affected.
• 5:42
  SPEAKER_00: The media caused more confusion and fear and showed the worst possible pictures and videos.
• 5:47
  SPEAKER_00: The fear factor likely makes consumers apprehensive for a little while.
• 5:52
  SPEAKER_00: I personally think beef sales at the grocery store will be impacted, and for a little while people would shift to other meats and pork and chicken are quite a bit cheaper than beef right now.
• 6:02
  SPEAKER_00: Second, will we find more cases in the U.S.?
• 6:05
  SPEAKER_00: Very likely, yes.
• 6:06
  SPEAKER_00: I've got a map at the bottom of page two, and you can see that this case was some 40, 45 miles inside the Texas border.
• 6:14
  SPEAKER_00: I think it's very likely that more cases are found in Texas in coming days and weeks.
• 6:19
  SPEAKER_00: So this story gets worse, not better.
• 6:22
  SPEAKER_00: Third, how does this affect reopening the U.S.-Mexican border?
• 6:27
  SPEAKER_00: Well, several months ago, USDA came up with a schedule and a process for when the border was reopened.
• 6:33
  SPEAKER_00: That meant unloading animals at the border crossing, treating them, testing them, quarantining animals for at least a week.
• 6:40
  SPEAKER_00: We feel like USDA will probably want to wrap their hands around uh how many cases we have in the U.S.
• 6:46
  SPEAKER_00: first and then move very slow to reopen the border.
• 6:49
  SPEAKER_00: When that time comes, uh, and they could be a few weeks to a few months away.
• 6:55
  SPEAKER_00: We believe that these same USDA procedures that had been established earlier would be in place, and that would limit daily crossings to probably a max capacity of 10,000 head per day and likely less than that.
• 7:10
  SPEAKER_00: This is way down from the max capacity of somewhere between 35 and 40,000 a day before the border was originally closed in November of 04 of 24.
• 7:21
  SPEAKER_00: So let's not forget that the felites in Mexico are feeding the lots of cattle today.
• 7:28
  SPEAKER_00: Uh, net net, if and when the border opens, the number of animals crossing is very likely gonna be small.
• 7:35
  SPEAKER_00: So, the summary here.
• 7:37
  SPEAKER_00: I fear that this could all be bearish live cattle in the short run, short term, longer term, I don't think this makes much of a difference at all.
• 7:47
  SPEAKER_00: Um now, on to weather.
• 7:50
  SPEAKER_00: Uh in the next several days, we've got a pretty decent front coming across the center part of the country.
• 7:56
  SPEAKER_00: It's gonna get uh Missouri, uh, Illinois, Indiana, Kentucky, Ohio.
• 8:01
  SPEAKER_00: Uh we get a pretty good uh dose of rain.
• 8:04
  SPEAKER_00: The six to ten day and eight to fourteen day time periods both have normalish rain and above normal temps across the corn belt.
• 8:13
  SPEAKER_00: So weather today is not threatening at all.
• 8:16
  SPEAKER_00: That's it for today.
• 8:17
  SPEAKER_00: Y'all have a good weekend.
• 8:18
  SPEAKER_00: We'll be back on Monday.