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Transcript

Daily Market Podcast Aug 13 · 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, August 13.
• 0:06
  SPEAKER_00: Walking in this morning, December corn is down three at 477 and three quarters.
• 0:10
  SPEAKER_00: November soybeans are off three quarters of a cent at 11.82 and a half.
• 0:16
  SPEAKER_00: December meal is up 70 cents at 315.
• 0:20
  SPEAKER_00: And September crude is down$1.70 at$81.50.
• 0:25
  SPEAKER_00: So you got USDA's reports out of the way yesterday, and those reports were potentially very bullish for corn and neutral for soybeans.
• 0:35
  SPEAKER_00: So today I want to spend more time focusing on corn and the longer-term implications.
• 0:41
  SPEAKER_00: So if we dive into corn, yesterday USDA made three very big changes to their estimates.
• 0:48
  SPEAKER_00: Number one, they increased U.S.
• 0:51
  SPEAKER_00: corn planted area by 1.4 million acres.
• 0:55
  SPEAKER_00: This big of its acreage change has only happened one time ever in history, which was last year.
• 1:02
  SPEAKER_00: No other year is even remotely close.
• 1:05
  SPEAKER_00: Number two, USDA came out with a U.S.
• 1:09
  SPEAKER_00: corn yield that was quite a bit lower than any of the market guesses.
• 1:13
  SPEAKER_00: And the history of USDA shows us that if they come out with a lower year a low yield in August, it typically means that it gets even lower in the following months, September, October time period.
• 1:27
  SPEAKER_00: And number three, USDA increased U.S.
• 1:31
  SPEAKER_00: corn export forecast.
• 1:32
  SPEAKER_00: This was a very logical move.
• 1:34
  SPEAKER_00: We've been discussing this for a month.
• 1:36
  SPEAKER_00: U.S.
• 1:36
  SPEAKER_00: corn export demand is just off the charts, massive.
• 1:41
  SPEAKER_00: So all this brings us to the ultimate number from USDA, their U.S.
• 1:46
  SPEAKER_00: ending stocks forecast for the upcoming 26-27 crop year.
• 1:52
  SPEAKER_00: I've got two charts on the bottom of page one.
• 1:56
  SPEAKER_00: If you look at the chart on the left, it shows us what is the final ending stocks each of the last several years.
• 2:04
  SPEAKER_00: And a 1.65 billion bushel stocks estimate would be one of the smallest stocks we've had in several years.
• 2:14
  SPEAKER_00: But the really interesting chart to me is one that I have on the bottom on the right on page one.
• 2:21
  SPEAKER_00: This is the past 10 years of USDA's August estimate of ending stocks versus what December corn futures do during September, October, November time period.
• 2:37
  SPEAKER_00: And quite obviously, what this chart implies is if with USDA's 1.65 billion bushel stock estimates, it implies that December corn should trade could trade something north of$5.50 in the next several months.
• 2:57
  SPEAKER_00: Now, the obvious conclusion to this chart is this.
• 3:27
  SPEAKER_00: So the net net, the summary of all this is we remain longer-term bullish CBOT corn, and any breaks should be very well supported.
• 3:39
  SPEAKER_00: All right, so let's move on to soybeans.
• 3:42
  SPEAKER_00: The soybean numbers out of USDA were not as bullish.
• 3:45
  SPEAKER_00: USDA increased soybean plantings 1.4 million acres, also.
• 3:50
  SPEAKER_00: They also increased estimates of U.S.
• 3:53
  SPEAKER_00: crush.
• 3:54
  SPEAKER_00: So here becomes the interesting part for soybeans.
• 3:57
  SPEAKER_00: If we assume a record U.S.
• 4:00
  SPEAKER_00: crop that USDA gave us yesterday, and use USDA's massive U.S.
• 4:05
  SPEAKER_00: crush number they gave us.
• 4:07
  SPEAKER_00: And let's also assume that Brazil and Argentina plant even more soybeans this upcoming season, because that's what we're being told from friends in South America.
• 4:16
  SPEAKER_00: That combination is a recipe for CBOT soybeans to trade mostly steady to higher for a little while here.
• 4:24
  SPEAKER_00: The bigger crush eventually means more meal than the U.S.
• 4:28
  SPEAKER_00: has export business for.
• 4:30
  SPEAKER_00: And this scenario is ultimately bearish for meal.
• 4:34
  SPEAKER_00: But if corn's going to be bullish and corn's going to be rallying, and seasonally, we sent out seasonal charts earlier this week.
• 4:43
  SPEAKER_00: Seasonally CBOT soybeans put in a low right now and they rally well into October, then we could easily see CBOT soybeans trade steady to higher for a little while.
• 4:55
  SPEAKER_00: And then once we get the South American crops in the ground, planting goes okay, the crop looks okay, then at some point it will be hard for CBOT soybeans to rally.
• 5:07
  SPEAKER_00: And then we eventually start to slide lower.
• 5:10
  SPEAKER_00: So beans are steady to higher right now.
• 5:14
  SPEAKER_00: Once we get into November, December, January, it becomes harder for them to rally.
• 5:19
  SPEAKER_00: And eventually they just roll over and uh and start trading lower at that point.
• 5:23
  SPEAKER_00: This seems to be the path of least resistance for soybeans going forward.
• 5:28
  SPEAKER_00: Moving on to weather, um, you've got another round of storms coming across uh Iowa, Illinois, Indiana in the next several days, and then you move into Miller next week.
• 5:40
  SPEAKER_00: And precip uh is kind of light and scattered.
• 5:43
  SPEAKER_00: We quite frankly, we could use more precip in the corn belt, particularly the uh western areas in the plain states.
• 5:50
  SPEAKER_00: And then we've got, if you look today, tomorrow, and into the weekend, you still got just smoking hot temperatures.
• 5:58
  SPEAKER_00: Uh Kansas down to Texas, and they're migrating over into the mid-south.
• 6:02
  SPEAKER_00: You've even got some uh scattered upper 90s and low 100s uh well into Missouri, Arkansas, Mississippi uh over the weekend.
• 6:14
  SPEAKER_00: So we need these hot temperatures to back off, and we could use some more precip.
• 6:19
  SPEAKER_00: And even if you look out in the 6 to 10, 8 to 14 day time period, these temperatures are here for a while.
• 6:25
  SPEAKER_00: We need more rain.
• 6:27
  SPEAKER_00: That's that's the only way to deal with these hot temperatures.
• 6:29
  SPEAKER_00: And quite frankly, that's just not in the cards today.
• 6:33
  SPEAKER_00: So that's it for today.
• 6:35
  SPEAKER_00: Thanks for listening.
• 6:36
  SPEAKER_00: We'll be back tomorrow.