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Transcript

Daily Market Podcast Jun 4 · 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, June 4th.
• 0:05
  SPEAKER_00: Walking in this morning, December corn is down three and a quarter at 456 and a half.
• 0:10
  SPEAKER_00: November soybeans are down five and a quarter at 1161 and a half.
• 0:15
  SPEAKER_00: July crude is down 370 at 92.30.
• 0:19
  SPEAKER_00: Today we're going to do this a little bit differently.
• 0:22
  SPEAKER_00: We're going to focus a lot more on cattle, even though today is Thursday, not Friday, as we typically uh focus on cattle Friday.
• 0:28
  SPEAKER_00: Last night, USDA confirmed a case of the New World Screwworm in La Pryor, Texas, in a three-week-old calf.
• 0:38
  SPEAKER_00: So, yes, it is now in the United States.
• 0:42
  SPEAKER_00: Officials established a 12-month sorry, 12-mile quarantine area to prevent movement of animals without inspection.
• 0:50
  SPEAKER_00: So now what?
• 0:51
  SPEAKER_00: Well, I've put two charts in today's report.
• 0:55
  SPEAKER_00: The first chart is showing what happened when we uh first got the case of the first mad cow uh in December 2003.
• 1:05
  SPEAKER_00: Uh we had five limit-down days and prices dropped 22% before they stopped going down.
• 1:13
  SPEAKER_00: The second chart is speculator positions and CME live cattle.
• 1:17
  SPEAKER_00: They currently have a very large long position in cattle futures.
• 1:23
  SPEAKER_00: So I think the next few days could be absolutely brutal.
• 1:29
  SPEAKER_00: Um, I think it's a given that we're going to be limited down for multiple days.
• 1:34
  SPEAKER_00: And by the way, on a sideline, the news headlines of flesh-eating screw worms uh are already out there.
• 1:43
  SPEAKER_00: ABC News, CNN, they're all carrying the stories, uh uh YouTube videos, you name it.
• 1:50
  SPEAKER_00: Uh flesh-eating screw screw worms are found in Texas.
• 1:54
  SPEAKER_00: So here we go.
• 1:56
  SPEAKER_00: On to corn this morning, um, speculators in the CBFT corn market continue to liquidate.
• 2:02
  SPEAKER_00: Uh, we have, I'll be honest with you, we have broken a lot lower than I thought was even possible right now.
• 2:06
  SPEAKER_00: So now we have to wonder, are speculators in a completely get-me-out phase?
• 2:12
  SPEAKER_00: If so, this selling may continue for several more days.
• 2:16
  SPEAKER_00: But the real question everybody's asking is this is the corn rally over?
• 2:20
  SPEAKER_00: I personally do not think so.
• 2:22
  SPEAKER_00: If we go back and look at seasonal tendencies, yes, we tend to rally the corn market into the end of planting and then we break.
• 2:30
  SPEAKER_00: And we are definitely following that pattern right now.
• 2:33
  SPEAKER_00: But can we rally out of this break?
• 2:36
  SPEAKER_00: History said yes, we can, but we need to have a reason.
• 2:40
  SPEAKER_00: We need to have some crop issue, we need to have new demand, such as China coming in.
• 2:45
  SPEAKER_00: We need something to spur the market, uh, and then it's entirely plausible that we go back and we make new highs for the move.
• 2:53
  SPEAKER_00: So for now, the path least resistance is lower.
• 2:56
  SPEAKER_00: Speculators are continuing to sell, but longer term, I remain quite bullish.
• 3:02
  SPEAKER_00: On soybeans, with a lacking Chinese news, CBOT soybean market is also in a liquidation mode.
• 3:09
  SPEAKER_00: Liquidation mode.
• 3:10
  SPEAKER_00: Speculators have sold over 30,000 contracts of soybeans the last four sessions.
• 3:15
  SPEAKER_00: So I put soybeans in the same category as corn.
• 3:19
  SPEAKER_00: Speculators are getting out right now.
• 3:22
  SPEAKER_00: But if we assume, and I think we have to, that Trump will hold China to this 25 million ton a year agreement that um that they signed back in October, when that starts, then CBOT soybeans rally very quickly, and we likely go back and make new highs.
• 3:43
  SPEAKER_00: Matter of fact, Chinese crush pace is increasing, and this week, Chinese officials have taken steps to speed up the inspection process once boats uh arrive to China, uh, of the newly arrived soybeans.
• 3:58
  SPEAKER_00: So it does seem that their soybean demand will be decent.
• 4:03
  SPEAKER_00: I remain bullish, soybeans, but we need China to show up.
• 4:08
  SPEAKER_00: Looking at weather, um, this system that was out in the plains has kind of moved uh a little bit further to the east.
• 4:16
  SPEAKER_00: Looks like the next four or five days uh we'll have pretty decent rains from Arkansas, Missouri, Iowa spread into parts of uh Illinois, uh maybe even uh western Tennessee.
• 4:31
  SPEAKER_00: Uh and then following that in the 6 to 10, uh, we kind of go into normal rainfall pattern uh across the Corn Belt.
• 4:38
  SPEAKER_00: We do have, and we mentioned this yesterday, some smoking hot temperatures coming to the plain states.
• 4:44
  SPEAKER_00: Um we start that today, tomorrow with some 95 plus degree temperatures.
• 4:49
  SPEAKER_00: Uh Texas-Oklahoma panhandle up into uh western and central Kansas.
• 4:55
  SPEAKER_00: And then by the time we get to Tuesday and Wednesday, those temperatures, uh, the 95s spread all the way as far north as the North Dakota-South Dakota border.
• 5:05
  SPEAKER_00: And we have scattered 100s from Texas, I mean, sorry, from the Oklahoma panhandle, western Kansas up into um southern and western Nebraska.
• 5:18
  SPEAKER_00: So that dry area that's been dry because of the prolonged drought is just not getting a break whatsoever.
• 5:24
  SPEAKER_00: And this is not good for crops out there at all.
• 5:27
  SPEAKER_00: So that's it for today.
• 5:30
  SPEAKER_00: Thanks for listening.
• 5:31
  SPEAKER_00: We'll be back tomorrow.