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Transcript

Daily Market Podcast Oct 15 · 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 Thursday morning, October 15th.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is up a half cent at 481.
• 0:10
  SPEAKER_00: November beans are down three and a half at 1273 and three quarters.
• 0:14
  SPEAKER_00: December meal is up 310, and crude is up 20 cents this morning.
• 0:20
  SPEAKER_00: Excuse me.
• 0:22
  SPEAKER_00: Today I want to focus mainly on U.S.
• 0:25
  SPEAKER_00: export potential.
• 0:27
  SPEAKER_00: And um, spoiler alert here, uh exports are hugely lacking.
• 0:33
  SPEAKER_00: As far as corn goes, today the corn market is looking at a scenario where U.S.
• 0:39
  SPEAKER_00: corn supplies are big, crops are off to a good start in South America, and net net there's just really no global supply issues.
• 0:49
  SPEAKER_00: Um, so the focus will shift more on U.S.
• 0:53
  SPEAKER_00: corn export demand.
• 0:55
  SPEAKER_00: For months and months and months, global corn demand has been huge, and we've talked about this, but that is starting to decline.
• 1:02
  SPEAKER_00: Global corn exports from the top five origins in August was down five percent from last year, and exports in September were down 11% from last year.
• 1:13
  SPEAKER_00: Over the past several months, we've also mentioned how Ukraine and Russia corn exports were very small, and that kept shifting more business back to the U.S.
• 1:23
  SPEAKER_00: Well, during the big CBOT rally in September, U.S.
• 1:28
  SPEAKER_00: corn priced itself out of the export market.
• 1:30
  SPEAKER_00: South America corn became much cheaper, and US began losing a lot of its export business.
• 1:36
  SPEAKER_00: And that remains the case today, even though corn prices have sold off.
• 1:42
  SPEAKER_00: In the chart, I've got a chart at the bottom of page one.
• 1:45
  SPEAKER_00: In this chart, you can see that outstanding U.S.
• 1:48
  SPEAKER_00: corn export sales today are not impressive at all.
• 1:52
  SPEAKER_00: Matter of fact, the export sales are actually 30% below average for this date.
• 1:59
  SPEAKER_00: So if we don't have a supply issue and export demand is not impressive, the upside for CBOT corn will remain very limited.
• 2:09
  SPEAKER_00: I remain in the camp that rallies should be sold and CBOT corn will grind lower and lower over the next several weeks and months.
• 2:18
  SPEAKER_00: If we have some crop issue pop up in South America, then the game changes.
• 2:22
  SPEAKER_00: Until then, it's gonna be very hard to be bullish.
• 2:26
  SPEAKER_00: Far as soybeans go, the soybean market is somewhat the same shape as corn.
• 2:32
  SPEAKER_00: The market is looking at a record large crop in the U.S.
• 2:35
  SPEAKER_00: And yes, U.S.
• 2:36
  SPEAKER_00: crushed demand is growing, but that news has been known for a long, long time.
• 2:42
  SPEAKER_00: Um, planting is going great in Brazil, weather looks okay for planting in Argentina, and right now it certainly looks like South America is headed towards a record large crop.
• 2:54
  SPEAKER_00: So, like corn, the soybean market will focus on U.S.
• 2:58
  SPEAKER_00: export potential.
• 2:59
  SPEAKER_00: We have mentioned how Brazilian and Argentine beans are cheaper than U.S.
• 3:04
  SPEAKER_00: landed in Europe and Asia and pretty much most everywhere in the world.
• 3:08
  SPEAKER_00: And let's not overlook the fact that Brazilian new crop beans in January, February are grossly cheaper than anywhere else.
• 3:16
  SPEAKER_00: And Brazil come January, February, Brazil will be stealing all the export business.
• 3:22
  SPEAKER_00: So US exports really comes down to us shipping stuff to our neighbors and the trade deal with China.
• 3:31
  SPEAKER_00: And today we are questioning if China is actually going to fulfill that or not.
• 3:36
  SPEAKER_00: And like corn, I've got a chart of outstanding soybean sales to um outstanding U.S.
• 3:42
  SPEAKER_00: soybean sales on this date in mid-October, and you can see they're not impressive.
• 3:49
  SPEAKER_00: Um and it's especially not impressive if you consider that China is half of that total this year.
• 3:55
  SPEAKER_00: Without China, U.S.
• 3:57
  SPEAKER_00: export sales right now would absolutely be pathetic.
• 4:01
  SPEAKER_00: So as long as the soybean crop in South America looks okay and export demand is, you know, doesn't change, CBOT soybeans have very, very limited upside.
• 4:14
  SPEAKER_00: If we get to January, February time period and we still have no issues in South America, it becomes very easy to imagine CBOT soybeans under$12.
• 4:27
  SPEAKER_00: Um, as far as weather goes, uh we still got this rain system leaning around from uh Texas up into uh Oklahoma and southeastern parts of Kansas into a little bit into Missouri.
• 4:39
  SPEAKER_00: And it looks like the bulk of the central corn belt and northern corn belt is just gonna have light scattered rains, and harvest should just be blowing and going.
• 4:50
  SPEAKER_00: Um, South American weather, uh, which will become you know infinitely more important in months to come.
• 4:57
  SPEAKER_00: Uh, as far as Brazil, Paranas still looks to be a little too wet, but planting there is soybean planning there is ahead of average, so you know, no big deal today.
• 5:08
  SPEAKER_00: Um, the rest of Brazil is particularly central and northern areas of Brazil.
• 5:12
  SPEAKER_00: They're beginning to get their seasonal rains, which is great for them.
• 5:16
  SPEAKER_00: So, really no issues in Brazil today.
• 5:20
  SPEAKER_00: As far as Argentina, we talked about corn planting is super fast.
• 5:23
  SPEAKER_00: Soybean planting will begin soon.
• 5:26
  SPEAKER_00: So net net soil moisture is good.
• 5:28
  SPEAKER_00: Um, rains going forward looks like they're gonna be light and scattered, and planting should go off without a hitch.
• 5:34
  SPEAKER_00: That's it for today.
• 5:35
  SPEAKER_00: Thanks for listening.
• 5:36
  SPEAKER_00: We'll be back tomorrow.