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Daily Market Podcast Oct 8 · M6 Capital Daily Market Podcast

• 0:00
  SPEAKER_00: Good morning.
• 0:01
  SPEAKER_00: This is Chris Myers with the M6 Capital Management with our Daily Market Letter on Thursday, October 8th.
• 0:07
  SPEAKER_00: Before we get started this morning, I have to be out of the office most of today.
• 0:10
  SPEAKER_00: I will be available via email, but it may be late this afternoon before I get a chance to respond to emails, just so everybody knows.
• 0:19
  SPEAKER_00: Walking in this morning, December corn is unchanged at 501 and three quarters.
• 0:23
  SPEAKER_00: November soybeans are down four and a half at 12.93.
• 0:26
  SPEAKER_00: December meal is down 240 this morning.
• 0:28
  SPEAKER_00: And November crude is up$4.10 back at$92.40, which is the highest price in several days now.
• 0:38
  SPEAKER_00: First thing we've got USDA reports tomorrow.
• 0:41
  SPEAKER_00: USDA will issue two major reports.
• 0:43
  SPEAKER_00: The first will be the October Crop Production Report, which is where USDA provides their updated estimates on U.S.
• 0:50
  SPEAKER_00: row crop production.
• 0:52
  SPEAKER_00: Based on this is based on field observation and farmer surveys.
• 0:56
  SPEAKER_00: And the second report at USDA tomorrow is the WASDI report.
• 1:01
  SPEAKER_00: This is the World Agricultural Supply and Demand Estimates, WASDI.
• 1:07
  SPEAKER_00: And this is where they provide updated estimates for global numbers, supply and demand numbers for row crops.
• 1:16
  SPEAKER_00: Both of these reports will be issued at 11 a.m.
• 1:19
  SPEAKER_00: Central Time tomorrow.
• 1:20
  SPEAKER_00: And on the bottom of page one, I've got the average market guesses for those reports.
• 1:25
  SPEAKER_00: As far as core news, um the USDA reports tomorrow will most certainly determine the direction of CBOT corn market for several months to come.
• 1:36
  SPEAKER_00: And with such massive speculator-long positions, in my opinion, there's no doubt that these reports need to be bullish tomorrow, or we could easily see a big sell-off.
• 1:48
  SPEAKER_00: But when you dive into the details, we believe that a bullish report tomorrow from USDA is becoming less and less likely.
• 1:57
  SPEAKER_00: So let's look at this.
• 1:59
  SPEAKER_00: First, the bigger stocks that we got out of USDA's stocks report last week basically added two bushels to the U.S.
• 2:08
  SPEAKER_00: crop equivalent.
• 2:10
  SPEAKER_00: So if before for us to get tight US corn ending stocks, we needed a 175 yield.
• 2:18
  SPEAKER_00: Well today that yield is 173.
• 2:21
  SPEAKER_00: And second, we have we get in yields from multiple universities and seed company yield trials.
• 2:31
  SPEAKER_00: And when we go through and analyze all that data, the data points to a very minimum decline from USD's last yield in September, which was 178.5.
• 2:43
  SPEAKER_00: So getting a 173 yield is out of the cards for us as far as my vote tomorrow.
• 2:50
  SPEAKER_00: And third, the U.S.
• 2:52
  SPEAKER_00: corn export demand is declining very rapidly.
• 2:56
  SPEAKER_00: For a long time, U.S.
• 2:58
  SPEAKER_00: exports had been a key bullish feature.
• 3:01
  SPEAKER_00: But as we've highlighted in recent days, cheaper corn across South America has really changed that part of the equation.
• 3:09
  SPEAKER_00: So the summary here, the corn market with their massive spec long, needs a bullish report from USDA tomorrow, and it appears to us that that will be hard to come by.
• 3:20
  SPEAKER_00: Um a data point we need to watch for is the low in these from corn last week was$4.95.
• 3:27
  SPEAKER_00: If after the USDA report tomorrow, if we start to break and we take out that low, it could get really ugly really fast.
• 3:36
  SPEAKER_00: Also, I so let's move to uh soybeans.
• 3:40
  SPEAKER_00: Like corn, it seems that chances of getting a bullish USDA report tomorrow for soybeans are pretty slim.
• 3:46
  SPEAKER_00: Speculators along soybeans, they're long meal, and we need to see ending stocks toward the low end of the average guesses uh for this to be a bullish report.
• 3:58
  unknown: U.S.
• 3:58
  SPEAKER_00: soybean export business is drying up, and so far yield reports do not support a big down in the U.S.
• 4:05
  SPEAKER_00: soybean yield.
• 4:06
  SPEAKER_00: Now, this is a obviously USD a report, and there's always some unknown factor.
• 4:11
  SPEAKER_00: But to us, it seems less and less likely that we get a bullish report for beans tomorrow.
• 4:17
  SPEAKER_00: In other news, China is back from one and a half weeks of national holiday.
• 4:22
  SPEAKER_00: The market will be watching very closely to see if they come in guns ablazing, buying more U.S.
• 4:28
  SPEAKER_00: soybeans or not.
• 4:30
  SPEAKER_00: But we should highlight that we are now into a time period of the calendar, uh time period where the calendar starts to play into the equation.
• 4:38
  SPEAKER_00: Soybeans from Brazil for January and February are by far the cheapest soybeans around.
• 4:44
  SPEAKER_00: That's their new crop.
• 4:46
  SPEAKER_00: So all China or any other nation has to do is to get just enough soybeans around them so that they can stop buying and they can wait till January so they can get new crop beans, uh, cheap new crop beans from Brazil.
• 5:00
  SPEAKER_00: So we may see if China comes in, we may see them buying just for a few weeks, and then that dries up too.
• 5:08
  SPEAKER_00: But this is kind of normal for this time of year, uh, particularly if the crop in Brazil is doing okay, the whole world just pauses their buying and waits on cheaper beans out of Brazil.
• 5:20
  SPEAKER_00: So again, for soybeans, it's becoming harder and harder to justify soybean prices up at these levels.
• 5:29
  SPEAKER_00: Um, like I said at the bottom of page one, I've got the average guesses for corn and bean yield and uh ending stocks guesses that you can see.
• 5:37
  SPEAKER_00: As far as weather, uh, again, the corn belt looks like it remains pretty open, um, particularly west of, say, St.
• 5:47
  SPEAKER_00: Louis, uh, west and north of St.
• 5:49
  SPEAKER_00: Louis.
• 5:50
  SPEAKER_00: Now, we do have an interesting development uh in the Gulf.
• 5:55
  SPEAKER_00: We've got this Hurricane Isaiah, if I'm pronouncing that correctly, that is in the center of the Gulf right now.
• 6:02
  SPEAKER_00: Looks like it's gonna be making landfall around Mobile uh around 1 a.m.
• 6:08
  SPEAKER_00: Saturday morning, and then moving up, kind of angling up toward Memphis.
• 6:13
  SPEAKER_00: Uh and I've got the forecasted path on page two and also the forecast for rainfall.
• 6:19
  SPEAKER_00: And it looks like uh coastal areas are gonna get oh four to six to eight inches, and once it starting to starts moving inland, uh those amounts drop off pretty quickly.
• 6:31
  SPEAKER_00: And most of that's gonna be highlighted to uh Alabama and maybe parts of Georgia.
• 6:36
  SPEAKER_00: So, anyway, that's on page two if you want to see that.
• 6:38
  SPEAKER_00: That's it for today.
• 6:39
  SPEAKER_00: Uh, we'll be back tomorrow.
• 6:41
  SPEAKER_00: Thanks for listening.