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Daily Market Podcast Aug 28 · 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, August 28th.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is up four and a half at 5.38.
• 0:11
  SPEAKER_00: November beans are up seven and a quarter at 1275 and a half.
• 0:15
  SPEAKER_00: December meal is up 210 at 342.90.
• 0:19
  SPEAKER_00: October crude is down 60 cents at 82.90.
• 0:24
  SPEAKER_00: Well, happy, happy Friday.
• 0:26
  SPEAKER_00: We have got a lot of moving parts in the market this morning.
• 0:31
  SPEAKER_00: First off, let's start with U.S.
• 0:33
  SPEAKER_00: and China.
• 0:34
  SPEAKER_00: With all the talk of the economic sanctions on Iran, the U.S.
• 0:40
  SPEAKER_00: has excluded one country from that mix, and it is China.
• 0:45
  SPEAKER_00: And U.S.
• 0:46
  SPEAKER_00: officials have stated that China needs time to figure out where it will get more oil from if the oil from Iran was cut off.
• 0:54
  SPEAKER_00: I find it interesting that China is excluded from all this talk of U.S.
• 1:00
  SPEAKER_00: coming down hard on any nation trading with Iran, especially with the Chinese president coming to Washington, D.C.
• 1:06
  SPEAKER_00: in four weeks.
• 1:08
  SPEAKER_00: Also, China has very much slowed down buying soybeans from the U.S.
• 1:13
  SPEAKER_00: So people are now questioning relations with China.
• 1:16
  SPEAKER_00: Is this China doing some dance before the meetings next month?
• 1:20
  SPEAKER_00: Who knows?
• 1:22
  SPEAKER_00: But issues with China are not good for U.S.
• 1:26
  SPEAKER_00: ag markets.
• 1:27
  SPEAKER_00: We know that for sure.
• 1:29
  SPEAKER_00: As far as core news, um, there's quite a bit of talk that yields across the mid-south are not quite as big as expected.
• 1:38
  SPEAKER_00: And some of that yield discussion is pointing the finger at Southern Rust in multiple areas in the in the mid-south.
• 1:46
  SPEAKER_00: Uh I don't know that this is a big enough deal to really move the needle, um, you know, to really affect the national yield.
• 1:54
  SPEAKER_00: Uh, but again, we just simply do not need any more uh production issues anywhere.
• 2:01
  SPEAKER_00: And as far as production issues go, there are some estimates uh of EU corn crop now coming in under 50 million tons.
• 2:09
  SPEAKER_00: That would be their smallest corn crop in over 25 years.
• 2:14
  SPEAKER_00: So global corn import demand gets bigger and bigger.
• 2:18
  SPEAKER_00: Um, also, as far as Ukraine goes, with a continued fighting with Russia, and that seems like it never ends, the Ag Minister in Ukraine stated in an interview yesterday that grain planted area would be declining sharply this next season.
• 2:34
  SPEAKER_00: That includes winter wheat, barley, corn, etc.
• 2:38
  SPEAKER_00: With limited export avenues and no end in sight for this war, it seems that farmers are simply pulling in the reins and deciding to take less risk.
• 2:49
  SPEAKER_00: Meanwhile, CBOT corn slowly marches higher.
• 2:52
  SPEAKER_00: December corn is at new contract highs this morning.
• 2:56
  SPEAKER_00: Clearly, I had felt like the market had already priced in a lot of this bullish news and that we were trading high enough for now.
• 3:04
  SPEAKER_00: But clearly, the market continues to trend higher.
• 3:07
  SPEAKER_00: On the export side, this this is something new here.
• 3:12
  SPEAKER_00: For the first time in a long, long time, yesterday, Taiwan bought several cargoes of corn, and every bit of it was purchased from South America.
• 3:22
  SPEAKER_00: Uh, some from Argentina, most of it from Brazil.
• 3:25
  SPEAKER_00: Zero of that corn was bought from the U.S.
• 3:28
  SPEAKER_00: That's not good for the home team.
• 3:31
  SPEAKER_00: This, to me, this is a yellow caution flag that maybe we are pricing ourselves out of some of the export market for Asian destinations.
• 3:41
  SPEAKER_00: To me, this is a crack in the armor.
• 3:44
  SPEAKER_00: Um it's something we need to watch.
• 3:47
  SPEAKER_00: For now, I remain longer-term bullish, but I see no reason to chase this corn market higher right now.
• 3:54
  SPEAKER_00: Any sets back should be very well supported.
• 3:57
  SPEAKER_00: As far as soybeans, um, yet again, the soybean market is being knee-jerked around like a kite in a windstorm.
• 4:04
  SPEAKER_00: Soybean Oil Futures traded a very big three and a half cent range from high to low yesterday.
• 4:10
  SPEAKER_00: That is a whopping 5% of its price.
• 4:13
  SPEAKER_00: That would be like the Dow Jones trading a 2,700-point swing during the day.
• 4:20
  SPEAKER_00: The issues were various social media posts and press releases from the EPA and Trump administration people discussing biofuel waivers for small refiners, and then other news of maybe some compensation for biofuel producers due to loss of waivers and blah, blah, blah.
• 4:41
  SPEAKER_00: Irregardless of the latest rumor, we're told that EPA will clarify biofuel exemptions and other factors by Monday.
• 4:52
  SPEAKER_00: But given their history of kicking the can down the road over and over, I will not be holding my breath.
• 4:58
  SPEAKER_00: Also, related to weather, I am firmly in the camp that late season rains on soybeans make a huge difference to yields.
• 5:08
  SPEAKER_00: And the cornbelt precip over the next two weeks is just simply not very much.
• 5:13
  SPEAKER_00: Um, I've got some maps on then on page three today that if uh if you look at one to 15 day rains, it's a big portion of the cornbelt that just doesn't get very much.
• 5:25
  SPEAKER_00: Um I don't know that we're taking much off the swell bean yield.
• 5:29
  SPEAKER_00: Um, I don't know, but it's a valid question for today.
• 5:34
  SPEAKER_00: So, as far as CBOT swabbings, we have a lot of move apart, and I still believe that we have rallied plenty enough for right now.
• 5:41
  SPEAKER_00: I don't see us selling off much.
• 5:43
  SPEAKER_00: I just can't see this rally this rally going much further, not right now.
• 5:48
  SPEAKER_00: Um, as far as cattle news, uh, a lot going on in the cattle market.
• 5:52
  SPEAKER_00: The cattle market continued its liquidation this week.
• 5:55
  SPEAKER_00: Speculators basically ran over each other to get out of longs uh on news that the Mexican border was now open, and then Trump posted a statement on social media claiming that U.S.
• 6:08
  SPEAKER_00: ground beef prices are too high and that U.S.
• 6:10
  SPEAKER_00: would allow a lot more beef to be imported with no tariff.
• 6:15
  SPEAKER_00: In both cases, we saw the market shoe first and ask questions later.
• 6:19
  SPEAKER_00: So let's tackle the Mexican border first.
• 6:22
  SPEAKER_00: Today there is only one location open, Douglas, Arizona, and the cattle moving through that facility are moving at a snail's pace.
• 6:31
  SPEAKER_00: We're only bringing in 600 to 700 head a day.
• 6:34
  SPEAKER_00: Even if they do open another location in Santa Teresa, which is being discussed, that is still a very small number of cattle.
• 6:43
  SPEAKER_00: This is not a floodgates being opened, okay?
• 6:47
  SPEAKER_00: For years and years, we've imported around 1.2 million head of cattle of Mexican cattle per year.
• 6:53
  SPEAKER_00: 700 head per day, just quite frankly, really does not matter much.
• 6:58
  SPEAKER_00: Also, let's tackle Trump's post on more beef imports in the U.S.
• 7:04
  SPEAKER_00: We're importing about all we can physically handle today.
• 7:08
  SPEAKER_00: We really don't have the infrastructure or the facilities to handle much more beef coming in.
• 7:13
  SPEAKER_00: Even if Brazil or Argentina or Australia or Mexico wanted to ship a lot more to the U.S.
• 7:19
  SPEAKER_00: today, it's very doubtful that that would even be able to happen.
• 7:23
  SPEAKER_00: So we do not see a big wall of beef coming that would pound our beef prices lower.
• 7:30
  SPEAKER_00: Okay.
• 7:31
  SPEAKER_00: However, over time, we do need to swallow that peel as a market.
• 7:36
  SPEAKER_00: There is a lot more beef available in the world, especially from Mexico, as we've talked before.
• 7:42
  SPEAKER_00: And U.S.
• 7:43
  SPEAKER_00: beef imports will continue to get bigger over time.
• 7:46
  SPEAKER_00: It ain't gonna happen overnight, but longer term, yes.
• 7:50
  SPEAKER_00: Also, I've got a chart at the bottom of page two that is very well worth taking a look at.
• 7:56
  SPEAKER_00: So far in 2026, our beef imports have represented 22% of US domestic consumption of beef.
• 8:06
  SPEAKER_00: That is the highest ever in history, okay, as a percentage.
• 8:12
  SPEAKER_00: Matter of fact, uh, and I've got a picture of this on the bottom of page too also.
• 8:16
  SPEAKER_00: In Memphis, Tennessee, we can now buy New York strips from Argentina for$12 a pound.
• 8:24
  SPEAKER_00: While other local grocery stores have U.S.
• 8:27
  SPEAKER_00: grain-fed New York strips at$19 to$21 a pound.
• 8:33
  SPEAKER_00: This is a major problem.
• 8:35
  SPEAKER_00: There is no reason whatsoever that Argentina beef should be selling at 40% cheaper than U.S.
• 8:42
  SPEAKER_00: beef in Memphis, Tennessee.
• 8:44
  SPEAKER_00: No reason for that.
• 8:46
  SPEAKER_00: Yet here we are.
• 8:48
  SPEAKER_00: Um, and and all that imported beef, for years and years, it's mainly just been trimmings going for ground beef.
• 8:57
  SPEAKER_00: But clearly, this Argentina beef, this example is being sold here in Memphis, this is these are muscle cuts.
• 9:04
  SPEAKER_00: And U.S.
• 9:05
  SPEAKER_00: Foods, one of the largest food distributors in the United States, food service distributors, they are now actively selling imported steak cuts to the food service industry.
• 9:17
  SPEAKER_00: Also, we were told that Walmart has just agreed to begin selling Brazilian beef in some of its stores.
• 9:25
  SPEAKER_00: This is a game changer in our beef market.
• 9:29
  SPEAKER_00: We have now opened the floodgates to imported beef cuts, no longer just trimmings.
• 9:36
  SPEAKER_00: And there is no stopping it now.
• 9:38
  SPEAKER_00: This is a big deal that we the market is going to have to figure out how to deal with.
• 9:44
  SPEAKER_00: Um, all right, so now let's talk about this cattle and feed uh from Friday.
• 9:48
  SPEAKER_00: The marketing rates continue to be super slow, but placements were even slower.
• 9:54
  SPEAKER_00: Placements uh in July were down 11% from a year ago.
• 9:59
  SPEAKER_00: And it seems that placements in the feedlots for the rest of the year are just gonna be super slow.
• 10:04
  SPEAKER_00: Cattle feed margins are negative right now, and meaning that if somebody sold cattle out of a feed lot, they'd be losing money.
• 10:12
  SPEAKER_00: And historically, this has meant that feed lots slow down their marketing pace even more.
• 10:18
  SPEAKER_00: They simply just don't want to recognize that loss, and there's always, you know, hope and a prayer for a rally and better PL, and I'll sell them later.
• 10:27
  SPEAKER_00: So placement stays slow, there's no cattle out there to place, and marketing stays slow also.
• 10:33
  SPEAKER_00: This means that cattle weights stay big.
• 10:36
  SPEAKER_00: Summary here.
• 10:37
  SPEAKER_00: We have plenty of USB from now to the end of the year.
• 10:41
  SPEAKER_00: Big beef imports, big cattle weights, okay.
• 10:46
  SPEAKER_00: But by the time we get to early 2027, these month after month after month of small placements should begin to tighten up US beef supplies.
• 10:56
  SPEAKER_00: But that's a long, long way to go.
• 10:58
  SPEAKER_00: We've got a lot of cleaning up to do in this market between now and the end of the year.
• 11:03
  SPEAKER_00: So I do have a picture of this Argentina beef on the bottom of page two.
• 11:10
  SPEAKER_00: This was at Fresh Market.
• 11:12
  SPEAKER_00: Um, and Fresh Market has even got their own labeling uh printed for this.
• 11:17
  SPEAKER_00: So this is not a one-time feature.
• 11:21
  SPEAKER_00: This is uh a statement that they're making that we're we're here to stay doing this.
• 11:26
  SPEAKER_00: Um so anyway, something to look at.
• 11:29
  SPEAKER_00: As far as weather goes, if you look at the one to five or six to ten or eleven to fifteen, I've got all of them on on page three.
• 11:37
  SPEAKER_00: It's a big chunk of the Midwest that just really does not get very much rainfall in the next 15 days.
• 11:45
  SPEAKER_00: Um, and again, I think that impacts sorbing yields.
• 11:49
  SPEAKER_00: Uh, we need to watch that.
• 11:51
  SPEAKER_00: So, anyway, that's it for today.
• 11:53
  SPEAKER_00: Thanks for listening.
• 11:54
  SPEAKER_00: We will be back on Monday.
• 11:55
  SPEAKER_00: Y'all have a great weekend.