Latest / M6 Capital Daily Market Podcast / Daily Market Podcast Sep 25

Transcript

Daily Market Podcast Sep 25 · 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 morning, September 25th.
• 0:07
  SPEAKER_00: Um, walking in this morning, December corn is down 11.5 at 515 and a half.
• 0:14
  SPEAKER_00: November beans are down 17 at$13 even.
• 0:16
  SPEAKER_00: December meal is down$670 at$365.70.
• 0:20
  SPEAKER_00: And October crude is down$180 at$92.80 this morning.
• 0:25
  SPEAKER_00: We need to start today talking about U.S.
• 0:27
  SPEAKER_00: and China because that's been the focus the whole week.
• 0:30
  SPEAKER_00: Well, NetNet, there's a lot of not a lot new.
• 0:33
  SPEAKER_00: Both sides have confirmed what they're calling a new joint arrangement, which is all chicken squat as far as I'm concerned.
• 0:44
  SPEAKER_00: That is a basically a two-month extension of an existing trade truce.
• 0:50
  SPEAKER_00: They punted the ball down the road, okay, instead of the current trade truce that is supposed to end in November, now it ends in January.
• 1:00
  SPEAKER_00: And that keeps a tear a pause on some of these lower tariffs and keeps rare earth minerals flowing from China to the U.S.
• 1:11
  SPEAKER_00: And they're basically hoping at some point down the road they get some bigger longer-term trade deal going.
• 1:18
  SPEAKER_00: So net net, nothing new on US ag exports to China.
• 1:23
  SPEAKER_00: Zero.
• 1:24
  SPEAKER_00: To me, this is a giant disappointment for CBOT grain markets.
• 1:29
  SPEAKER_00: Therefore, we're down 12 in corn and 17 in beans right now.
• 1:33
  SPEAKER_00: And that may not be the lowest for the day.
• 1:36
  SPEAKER_00: As far as corn goes, um, yeah, we got CBOT corn down 12.
• 1:41
  SPEAKER_00: And right now, corn is trading the lowest price it's traded in a month.
• 1:47
  SPEAKER_00: The market rallied on, you know, start a month ago on smaller U.S.
• 1:52
  SPEAKER_00: corn yield, and then it rallied again on a potential Chinese trade deal.
• 1:56
  SPEAKER_00: Well, it seems the chances of a Chinese trade deal are hugely diminishing, and we don't know anything new on the U.S.
• 2:03
  SPEAKER_00: corn yield, and let's not overlook the fact that corn planting in Argentina is now 17% complete, and that is two times faster than the five-year average.
• 2:15
  SPEAKER_00: And according to our data, it's the fastest planting pace in at least 40 years.
• 2:22
  SPEAKER_00: Then let's throw on U.S.
• 2:25
  SPEAKER_00: corn export sales yesterday, which were small and quite disappointing.
• 2:31
  SPEAKER_00: So, speculators who have a record-long corn position, they all walk into the office today and they have to question why are we long so much corn?
• 2:43
  SPEAKER_00: There is so much bullish news that has already been built into this market, and therefore the reason we're at high prices, I think it's gonna be really hard to push CBOT corn higher right now.
• 2:54
  SPEAKER_00: In the near term, it feels like the path to least resistance is likely lower.
• 2:59
  SPEAKER_00: Longer term, I still remain quite bullish, but that is after we get done with harvest and likely after we roll into 2027, and we see U.S.
• 3:10
  SPEAKER_00: corn supplies actually begin to tighten up.
• 3:12
  SPEAKER_00: Between now and then, the market is way too long and way too high.
• 3:19
  SPEAKER_00: Now into soybean news.
• 3:21
  SPEAKER_00: Um soybean market was really, really hoping on either a new Chinese ag trade deal or at least China cutting the import tariffs on U.S.
• 3:31
  SPEAKER_00: beans.
• 3:32
  SPEAKER_00: Well, it looks like neither one occurred.
• 3:35
  SPEAKER_00: So now what?
• 3:36
  SPEAKER_00: The best way to describe this picture is like a high school girl all dressed up for the big dance and finds out there is no dance and her date never shows up.
• 3:48
  SPEAKER_00: So, path least resistance is lower.
• 3:52
  SPEAKER_00: Meanwhile, U.S.
• 3:53
  SPEAKER_00: meal prices pushed to new highs yesterday.
• 3:55
  SPEAKER_00: Western crushers are still scrambling to get beans to ramp up crush, and these rains just keep coming in, they keep new crop harvests slow, particularly in Iowa and Nebraska.
• 4:06
  SPEAKER_00: Some of the beans harvested in Illinois, it's hard to get them pulled over because those beans are going straight to the river for export flows.
• 4:13
  SPEAKER_00: The spot tightness will definitely get resolved by the time we get into early and mid-October.
• 4:21
  SPEAKER_00: But for now, meal prices uh remain firm.
• 4:26
  SPEAKER_00: We discussed U.S.
• 4:27
  SPEAKER_00: bean export prices are not competitive, and yesterday, U.S.
• 4:32
  SPEAKER_00: soybean export sales were quite small, actually, quite pitiful.
• 4:38
  SPEAKER_00: So it does look like we are losing export business at these high prices.
• 4:43
  SPEAKER_00: We still maintain CBOT soybean prices are high enough, particularly for right now, rallies should be sold.
• 4:50
  SPEAKER_00: The next potentially bullish item we need to watch is weather in Brazil.
• 4:54
  SPEAKER_00: I've got a chart on the bottom of page one on US, I'm sorry, not US, on Argentina corn planting progress.
• 5:01
  SPEAKER_00: Um again, they're off to a super fast start.
• 5:06
  SPEAKER_00: As far as the cattle comments go, just when we thought a wild market could not get much more erratic, we end up with ice raids this week in three Kansas beef slaughterhouses.
• 5:19
  SPEAKER_00: And I know this is shocking, but for some reason quite a few workers just simply stopped showing up for work.
• 5:26
  SPEAKER_00: So cattle kills this week have declined.
• 5:28
  SPEAKER_00: And we fully expect ice to move into Texas and Nebraska slaughter plants the next week to two weeks.
• 5:36
  SPEAKER_00: So the net result is less workers at these plants, and therefore slaughter rates have slowed down.
• 5:43
  SPEAKER_00: We've talked, we've actually talked to feedback in Kansas that were supposed to be shipping cattle today and tomorrow that have had their shipments delayed until next week, and one feed light even had some shipments delayed two weeks.
• 5:57
  SPEAKER_00: So this is not good for cash cattle market at all.
• 6:02
  SPEAKER_00: If kills are slow and packers don't need to don't need cattle, then there's a lot more cattle that need to be sold that uh and you don't have any buyers for.
• 6:14
  SPEAKER_00: Um, the other development in cattle is how fast these feed large feed yard margins have imploded.
• 6:21
  SPEAKER_00: Um, I've got a chart on the bottom of page two.
• 6:24
  SPEAKER_00: Very worthwhile taking a look at.
• 6:29
  SPEAKER_00: I mean, margins for the last one and a half years have been amazing.
• 6:34
  SPEAKER_00: But so far in September, closeouts are mostly running over$200 ahead losses.
• 6:41
  SPEAKER_00: We've even heard some feed yards in Kansas with some closeouts over$400 ahead losses.
• 6:48
  SPEAKER_00: And live cattle futures for DES and Feb in April imply that closeouts stay deep in the red for the next six months.
• 6:55
  SPEAKER_00: This ain't good for feeder values at all.
• 6:58
  SPEAKER_00: Yes, we have tight supplies of feeders, but feedlots losing this much money makes bankers ask some pretty hard questions and it makes feedlots uh tighten up their purse springs quite a bit.
• 7:11
  SPEAKER_00: So, how did the market change so fast?
• 7:14
  SPEAKER_00: Well, the shortage of feeders and therefore the shortage of live cattle is the main reason for the rally to begin with.
• 7:19
  SPEAKER_00: And then we had speculators that got in on the buy and spree, and they pushed prices likely higher than they ever should have gone.
• 7:28
  SPEAKER_00: Then we got to a point where packers were losing money, they started cutting to kills, and feed lights held on to cattle longer and longer, and live weights just got bigger and bigger.
• 7:39
  SPEAKER_00: And then these big beef imports actually started to matter.
• 7:43
  SPEAKER_00: Uh, as we've reported, we're seeing retailers cut back on domestic purposes purchases and switch to imported beef.
• 7:50
  SPEAKER_00: That ain't good for the home team.
• 7:52
  SPEAKER_00: Speculators have run over each other, getting out of their lungs, and it's becoming harder and harder for U.S.
• 8:00
  SPEAKER_00: beef prices to hold together.
• 8:02
  SPEAKER_00: And then you've got these sky-high fuel prices that the entire industry is worried about, beef demand now.
• 8:09
  SPEAKER_00: So all of this accumulates into a really bad situation.
• 8:13
  SPEAKER_00: When this boulder has started rolling downhill, it's gonna be hard to stop it.
• 8:18
  SPEAKER_00: Um right now, it does seem that CME cattle prices are gonna be hard to rally.
• 8:24
  SPEAKER_00: This thing may have to go lower before it's over with.
• 8:26
  SPEAKER_00: I'm still in the count that we could be bullish in the spring and summer of 2027, but the rest of 26, it looks like we're gonna be trading steady to lower.
• 8:36
  SPEAKER_00: Um, I advise everybody again to take a look at the chart on the bottom of page two at uh Kansas closeouts for steers.
• 8:46
  SPEAKER_00: This is pretty interesting and looks like it's gonna be right now, looks like it's gonna be bad for several more months to come.
• 8:54
  SPEAKER_00: As far as weather, we got a couple of interesting things to talk about.
• 8:57
  SPEAKER_00: Number one, it looks like Western Corn Belt, the plains and western cornbelt stays wet the next several days.
• 9:03
  SPEAKER_00: But really, the more interesting point is this Hurricane Polo, which is in the Pacific, just uh on the west side of Mexico.
• 9:14
  SPEAKER_00: It's supposed to be making landfall coming across the Baja Peninsula on Monday and up into Mexico and far western parts of Texas on Tuesday, uh, maybe even Wednesday.
• 9:30
  SPEAKER_00: Now, I will admit the weather models do an absolutely horrible job of forecasting where these hurricanes go and how they uh behave once they make landfall.
• 9:41
  SPEAKER_00: But talking to several weather guys this morning, they are all fearful that mid next week this low pressure from this hurricane comes together with a low pressure with this rain, uh rainy pattern in the plains already.
• 9:57
  SPEAKER_00: And then all of a sudden, the western corn belt just gets really, really soaked late next week into next weekend.
• 10:05
  SPEAKER_00: So that's something we need to watch.
• 10:07
  SPEAKER_00: Hopefully, we'll be a whole lot smarter on the path of this thing when we walk in on Monday morning.
• 10:12
  SPEAKER_00: But for right now, that that is a risk that that could happen.
• 10:15
  SPEAKER_00: So that's it for today.
• 10:17
  SPEAKER_00: Thanks for listening.
• 10:18
  SPEAKER_00: We'll be back on Monday.