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Transcript

Daily Market Podcast Aug 21 · 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 Friday, August 21st.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is down one and a quarter at 502 and a quarter.
• 0:11
  SPEAKER_00: November soybeans are down four and a quarter at 1232 and a quarter.
• 0:17
  SPEAKER_00: December meal is down a dollar$1.70 at$322.10.
• 0:21
  SPEAKER_00: October crude is up 36, I'm sorry, 30 cents at 87.10.
• 0:28
  SPEAKER_00: We need to start today talking about Russia and Iran.
• 0:32
  SPEAKER_00: This week, European intelligence services released some information that Russia has sent dozens of military supply ships across the Caspian Sea to Iran.
• 0:43
  SPEAKER_00: They believe these ships are carrying thousands upon thousands of Russia-made drones.
• 0:48
  SPEAKER_00: If we back up a little bit, years ago, when Russia first invaded Ukraine, Iran sent Russia some of its drones.
• 0:56
  SPEAKER_00: Russia took their design, improved on it, and built multiple factories.
• 1:02
  SPEAKER_00: So here's a conclusion, my conclusion of this information.
• 1:06
  SPEAKER_00: Our U.S.
• 1:07
  SPEAKER_00: government officials continue to tell us that Russia is broke and their military weapons are slim.
• 1:12
  SPEAKER_00: And they tell us the same thing with Iran.
• 1:15
  SPEAKER_00: But Russia producing and selling thousands of drones to Iran clearly does not imply that either conflict in either area will end anytime soon.
• 1:26
  SPEAKER_00: So we got that to deal with.
• 1:29
  SPEAKER_00: Moving on to corn news.
• 2:19
  SPEAKER_00: No way around it.
• 2:21
  SPEAKER_00: I have followed this pro farmer tour for 30 plus years and even went on the tour several times uh years ago.
• 2:27
  SPEAKER_00: It started, if some of you remember, it started off as the John Deere crop tour many, many years ago.
• 2:33
  SPEAKER_00: But anyway, their state-by-state field count data is historically very useful.
• 2:39
  SPEAKER_00: Um sometime this afternoon, ProFarmer and their infinite wisdom, they will issue their best guess at a U.S.
• 2:48
  SPEAKER_00: corn yield.
• 2:49
  SPEAKER_00: And I'll be honest with you, I'm not sure how they come up with that.
• 2:52
  SPEAKER_00: Many times over the years, we have seen that their state data does not at all align with whatever they say that the national corn yield is.
• 3:03
  SPEAKER_00: As strange as that may sound.
• 3:05
  SPEAKER_00: But anyway, that's that's coming this afternoon, good, bad, or ugly.
• 3:10
  SPEAKER_00: But as far as I look at it, if I look at the state by state data, it absolutely supports a U.S.
• 3:17
  SPEAKER_00: corn yield, eventually ending up at a 176, 177 uh type of yield.
• 3:23
  SPEAKER_00: This is way below USDA's 180.7 they issued last week.
• 3:28
  SPEAKER_00: Later today, I'm gonna send out uh email out a white paper going into much, much more detail on corn and lay out why I think this is just ravingly bullish.
• 3:41
  SPEAKER_00: Um, so anyway, just be on the lookout for that.
• 3:44
  SPEAKER_00: But nevertheless, in the short run, short term, I'm still bullish corn, period.
• 3:49
  SPEAKER_00: As far as soybeans go, uh, the pro farmer soybean podcasts in Iowa, Minnesota showed a potentially decent crop.
• 3:56
  SPEAKER_00: Obviously, podcasts are not the holy grail of data, uh, and this crop has a long way to go.
• 4:02
  SPEAKER_00: But the market will take the soybean data, the cumulative soybean data from this trip, and imply that maybe the U.S.
• 4:11
  SPEAKER_00: crop is a little bit smaller than USJ's estimate last week.
• 4:14
  SPEAKER_00: And that will be supportive to this market.
• 4:17
  SPEAKER_00: Uh breaks will be very well supported.
• 4:19
  SPEAKER_00: Meanwhile, Chinese uh soybean import data for July was released released yesterday, and it showed uh monthly imports in July were a new monthly record.
• 4:29
  SPEAKER_00: China continues to steadily buy more and more U.S.
• 4:32
  SPEAKER_00: beans.
• 4:33
  SPEAKER_00: Weekly soybean export sales yesterday showed more and more export business coming back to the U.S.
• 4:40
  SPEAKER_00: We are selling beans to multiple European and Asian nations, um, especially with U.S.
• 4:46
  SPEAKER_00: soybean soybean prices being cheaper than Brazil uh from now all the way through December.
• 4:53
  SPEAKER_00: So for now, CBOT soybeans, I remain uh bullish with the market concerned that a smaller crop, we may be having a smaller crop at the same time that export demand is getting bigger.
• 5:07
  SPEAKER_00: As far as cattle comments, um cash cattle continues to weak lower, to uh leak lower.
• 5:15
  SPEAKER_00: In on this current break, we have been led down by speculators selling.
• 5:20
  SPEAKER_00: Um, they have been exiting their long positions, and the futures have led cash markets lower.
• 5:25
  SPEAKER_00: Matter of fact, futures have fallen more than cash, and you can see in the chart I got on the bottom of page two that futures prices today imply uh even more of a break coming in cash.
• 5:37
  SPEAKER_00: I'm in the camp that we are probably somewhere close to the lows in the futures now.
• 5:43
  SPEAKER_00: Cash cattle may continue to leak a little bit lower in coming weeks, but I don't think uh we're gonna break a whole lot more.
• 5:52
  SPEAKER_00: On this break in cash, uh we have seen the beef market firm in the U.S.
• 5:59
  SPEAKER_00: And U.S.
• 6:00
  SPEAKER_00: beef packers, for the first time uh in many months have a positive margin.
• 6:05
  SPEAKER_00: They cut kills for a long time.
• 6:07
  SPEAKER_00: We discussed that, and it finally worked for them.
• 6:10
  SPEAKER_00: And I've got a chart on the bottom of page two.
• 6:13
  SPEAKER_00: You can see that beef prices have rallied.
• 6:15
  SPEAKER_00: Part of this is a seasonal rally, part of this is them cutting kills.
• 6:19
  SPEAKER_00: As for beef demand, beef demand in the U.S.
• 6:22
  SPEAKER_00: remains just super strong.
• 6:23
  SPEAKER_00: Retail beef margins are very good.
• 6:26
  SPEAKER_00: Restaurant business is crazy strong in the U.S.
• 6:29
  SPEAKER_00: right now.
• 6:30
  SPEAKER_00: So, beef demand is big.
• 6:33
  SPEAKER_00: As we reported last week, um, Tyson announced that they were shutting two plants.
• 6:39
  SPEAKER_00: With so much overcapacity in the U.S.
• 6:42
  SPEAKER_00: beef packing industry, these two plants will not be the last plants to close.
• 6:47
  SPEAKER_00: We will see more.
• 6:48
  SPEAKER_00: There's been simply way, way, way too much bloodshed in the last uh 12 to 18 months.
• 6:55
  SPEAKER_00: If we go back and just look at Tyson, just for a point of reference, in the year 2000, Tyson Foods had a daily slaughter capacity of around 37,000 head per day.
• 7:09
  SPEAKER_00: By 2015-16 time period, that had dropped to about 27,000 capacity and stayed there uh for quite a while.
• 7:19
  SPEAKER_00: And with this announcement, that number will now be dropping to around 15,500.
• 7:25
  SPEAKER_00: So in let's call it 25, 26 years, their slaughter capacity has gone from 37,000 to 15,000.
• 7:35
  SPEAKER_00: Um, USDA will issue its cattle and feed report this afternoon.
• 7:38
  SPEAKER_00: We expect to see continued very slow marketing rates, which has kind of been our problem for many months this year.
• 7:47
  SPEAKER_00: Um, we think the July number for cattle marketed out of feedlots will be down around 7% from last year.
• 7:56
  SPEAKER_00: And we're looking for the placement number going into feedlots to be down about 6%.
• 8:02
  SPEAKER_00: So net net, your cattle and feed number just keeps getting a little bit bigger.
• 8:07
  SPEAKER_00: With month after month of slow cattle marketings out of feedlots, um, we look for cattle and feed numbers to remain at or above last year's level well into early 2027.
• 8:20
  SPEAKER_00: Let's say for the next four or five, six months.
• 8:23
  SPEAKER_00: With limited feeders available to be placed in the feedlots, we believe that cattle numbers and feedlots will begin to tighten up in the spring and summer 27.
• 8:36
  SPEAKER_00: And if we focus on feeders here for a moment, with such poor pasture conditions, many of the summer grazing cattle have already been sold at auction or moved into feedlots by now.
• 8:47
  SPEAKER_00: So feeder supplies should remain really tight for the remainder of 2026.
• 8:53
  SPEAKER_00: I think today the biggest price risk to feeders is the price of corn going up a lot.
• 8:59
  SPEAKER_00: And quite frankly, I think that is a very legitimate risk.
• 9:03
  SPEAKER_00: Moving on to weather, um, we got light scattered uh rainfall this week and into next week uh across the corn belt.
• 9:15
  SPEAKER_00: Temperatures, I feel like a broken record, temperatures in the mid-south and and to the west uh into Texas, Oklahoma just remain smoking hot um through this weekend.
• 9:27
  SPEAKER_00: Now it is interesting, once we get into late next week, it seems like the hot temperatures kind of retrograde back west.
• 9:36
  SPEAKER_00: Um they seem to be really focused, Texas, Oklahoma, and areas to the west.
• 9:42
  SPEAKER_00: Um the central corn belt and areas of the mid-south kind of back off of these warmer temperatures, uh, at least for a little while.
• 9:51
  SPEAKER_00: And that does allow for a little bit better moisture profile going forward.
• 9:56
  SPEAKER_00: Um, if you look at the six to ten and eight to fourteen day time period, we've got a but normal to above normal precip covering pretty much all the grain growing area in the United States.
• 10:07
  SPEAKER_00: So that is a nice change that we have not had in quite a while.
• 10:11
  SPEAKER_00: So that's it uh for today's report.
• 10:14
  SPEAKER_00: Look for the email on corn later today.
• 10:17
  SPEAKER_00: Y'all have a great weekend.
• 10:18
  SPEAKER_00: We'll be back on Monday.