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Transcript

Daily Market Podcast Oct 2 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers with M6 Capital Management with our daily market letter on Friday morning, October 2nd.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is down two and three quarters at 499 and a half.
• 0:13
  SPEAKER_00: November soybeans are down six at 1278.
• 0:17
  SPEAKER_00: December meal is down 460 at 348.70.
• 0:21
  SPEAKER_00: And November crude is down 350 at 89.35 this morning.
• 0:25
  SPEAKER_00: As far as corn news, late yesterday, Stone X issued their October yield estimate, which was a result of a farmer survey.
• 0:33
  SPEAKER_00: Their U.S.
• 0:34
  SPEAKER_00: corn yield was 182.1 bushels per acre.
• 0:38
  SPEAKER_00: This is down 0.8 bushels from their yield estimate in September.
• 0:43
  SPEAKER_00: This yield is nowhere close to what the market is thinking.
• 0:47
  SPEAKER_00: Me, along with most of the market, is leaning towards a U.S.
• 0:50
  SPEAKER_00: corn yield of 175 to 176 bushels per acre.
• 0:54
  SPEAKER_00: With this bigger stocks estimate two days ago from USDA, we need a mid-170s corn yield to give us tight corn stocks and to cause any demand rationing.
• 1:06
  SPEAKER_00: So this 182 yield is much, much bigger than the market is looking for.
• 1:11
  SPEAKER_00: In the next few days, we will have other ag firms issuing their own yield estimates.
• 1:16
  SPEAKER_00: If more yields come in near this yield, then speculators are stuck in a bad trade and they will need to get out.
• 1:24
  SPEAKER_00: This could end up causing quite a break in CBOT corn.
• 1:28
  SPEAKER_00: Meanwhile, corn planting is going great in Argentina.
• 1:32
  SPEAKER_00: I've got a chart on the bottom of page one showing that their corn planting is 22% complete.
• 1:37
  SPEAKER_00: This is the fastest planting pace in at least the last 20 years.
• 1:43
  SPEAKER_00: Brazilian corn planting is also running ahead of normal pace.
• 1:47
  SPEAKER_00: Also, weekly U.S.
• 1:48
  SPEAKER_00: corn export sales yesterday were pathetically small.
• 1:52
  SPEAKER_00: We are definitely losing export business out of the U.S.
• 1:57
  SPEAKER_00: With declining U.S.
• 1:58
  SPEAKER_00: exports, the corn market really, really needs some supply issue to keep prices this high right now.
• 2:04
  SPEAKER_00: This potentially bigger corn yield that we saw from Stone X, uh, good planning progress in South America, those are not supply issues.
• 2:16
  SPEAKER_00: Uh, those are actually the exact opposite.
• 2:19
  SPEAKER_00: So today it certainly seems like the path of least resistance is lower.
• 2:23
  SPEAKER_00: If we have more U.S.
• 2:24
  SPEAKER_00: corn yield estimates next week that are in the 180s, we can see CBOT corn have quite a break.
• 2:32
  SPEAKER_00: As far as soybeans, the Stonex yield estimates for U.S.
• 2:36
  SPEAKER_00: soybeans was increased to 54.1 bushels per acre.
• 2:41
  SPEAKER_00: This type of yield would result in a massive record-large U.S.
• 2:46
  SPEAKER_00: soybean crop.
• 2:47
  SPEAKER_00: And weather looks to be open across the corn belt for the next 10 days.
• 2:51
  SPEAKER_00: Some crush plants and I were still bidding$1.25 over for beans delivered today or tomorrow.
• 2:58
  SPEAKER_00: We expect those bids to collapse next week.
• 3:01
  SPEAKER_00: As long as soybean harvest ramps up and U.S.
• 3:04
  SPEAKER_00: crush plants pick up their crush place, uh their crush pace, meal prices should break pretty hard in the next 10 days in the U.S.
• 3:12
  SPEAKER_00: And U.S.
• 3:13
  SPEAKER_00: soybean export business continues to get smaller.
• 3:17
  SPEAKER_00: Both Brazil and Argentina soybeans are cheaper than U.S.
• 3:22
  SPEAKER_00: Gulf this morning.
• 3:23
  SPEAKER_00: Meanwhile, rains are picking up in Mato Grosso and other areas of central Brazil, so planting place should really get going in the coming days.
• 3:32
  SPEAKER_00: So it looks like we have a bigger U.S.
• 3:34
  SPEAKER_00: crop, declining U.S.
• 3:35
  SPEAKER_00: exports, and decent crop weather in South America.
• 3:38
  SPEAKER_00: It is becoming harder and harder to justify CBFT soybean prices this high.
• 3:43
  SPEAKER_00: If we don't have some big demand show up or some big supply issue, which we don't have, prices are headed lower.
• 3:51
  SPEAKER_00: And let's not forget that speculators are long a very large amount of CBFT soybeans and meal.
• 3:58
  SPEAKER_00: This could be a bad couple of weeks coming for them.
• 4:02
  SPEAKER_00: As far as cattle news this morning, um for months now we have discussed the slow placement rates going into feedlots.
• 4:10
  SPEAKER_00: And we have long expected cattle numbers to tighten up in early 2027.
• 4:16
  SPEAKER_00: But when we look through cattle placements over the last six to seven months, one state really stands out with the smallest placement rates, and that's Texas.
• 4:26
  SPEAKER_00: We expect cattle numbers there to tighten up in Texas much quicker than they tighten up in the north.
• 4:32
  SPEAKER_00: And that may be just right around the corner.
• 4:36
  SPEAKER_00: With high diesel prices, we could see Packers having to buy cattle in Nebraska and ship cattle to Texas to run their slaughter plants there.
• 4:45
  SPEAKER_00: But these high diesel prices, we could see some very strange cash trades in the coming weeks.
• 4:52
  SPEAKER_00: Packers would love to pay less for cattle up north due to these high freight rates, but cattle feeders in Nebraska are not stupid.
• 4:58
  SPEAKER_00: They're not going to make this job easy for the Packers.
• 5:01
  SPEAKER_00: This likely means that cash cattle prices firm up in northern areas, and Packers go from having okay margins today to losing money very quickly due to these high freight rates.
• 5:13
  SPEAKER_00: The end result of all of this is very likely Packers lose margins and they cut kills yet again, much like we have seen several times already this year.
• 5:23
  SPEAKER_00: So the next big question is beef prices.
• 5:26
  SPEAKER_00: Seasonally, beef prices are mostly flat from now until the end of the year and then rally once we're into the new year.
• 5:34
  SPEAKER_00: This is not grilling season.
• 5:36
  SPEAKER_00: October is National Pork Month, and Thanksgiving and Christmas are not big times for retailers to sell beef.
• 5:44
  SPEAKER_00: And this time of year, with such uh in this year, with such massive beef imports, retailers and food service companies are moving a lot more imported muscle cuts, imported steaks.
• 5:57
  SPEAKER_00: So getting a decent beef rally between now and January seems very unlikely.
• 6:04
  SPEAKER_00: So net net, we have tighter numbers coming in in Texas.
• 6:10
  SPEAKER_00: Packers will likely be shipping cattle from the north to the south.
• 6:15
  SPEAKER_00: Packer margins go down, kills likely slow down, and beef prices remain steady and maybe even lower.
• 6:23
  SPEAKER_00: This is not a scare a scenario for a big sustained rally in cattle prices.
• 6:29
  SPEAKER_00: But, and I've got a chart of this on the bottom of page two the futures market already has a rally built in.
• 6:38
  SPEAKER_00: December price is several dollars over cash right now, and then Feb and April contracts are both even higher.
• 6:46
  SPEAKER_00: So I remain in the camp that see me cattle prices may be hard to rally in the coming weeks.
• 6:52
  SPEAKER_00: We have a lot of moving parts right now, and the futures already have priced in a premium to cash.
• 6:58
  SPEAKER_00: I'm still in the camp that I want to be bullish in the spring and summer of 27, but not very bullish in the near term.
• 7:08
  SPEAKER_00: As far as weather goes, uh it looks like we're gonna be wide open for harvest uh the next 10 days to two weeks across the Corn Belt.
• 7:16
  SPEAKER_00: Harvest should make huge progress.
• 7:19
  SPEAKER_00: Um and you know, we're that comes with additional farmer selling that we hadn't even talked about yet.
• 7:25
  SPEAKER_00: So uh that's it for today, and that's it for the week.
• 7:29
  SPEAKER_00: We'll uh y'all have a good weekend.
• 7:30
  SPEAKER_00: We'll be back on Monday.
• 7:31
  SPEAKER_00: Thanks.