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Transcript

Daily Market Podcast Aug 5 · 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 for Wednesday, August 5th.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is down 5.5 at 460.
• 0:11
  SPEAKER_00: November soybeans are down nine and a quarter at 1168.5.
• 0:15
  SPEAKER_00: December meal is down 280 at 315.60.
• 0:19
  SPEAKER_00: And September crude is up 10 cents at 75.90.
• 0:23
  SPEAKER_00: As far as corn news this morning, today the CBOT markets are all about U.S.
• 0:28
  SPEAKER_00: yield estimates.
• 0:29
  SPEAKER_00: As we have discussed, USDA will issue their August crop production report on Wednesday, next Wednesday, August 12th.
• 0:37
  SPEAKER_00: And this week we are getting several farmer survey-based yield estimates.
• 0:43
  SPEAKER_00: USDA has been using a trend yield of 183, 183 bushels per acre for the U.S.
• 0:48
  SPEAKER_00: corn yield.
• 0:50
  SPEAKER_00: That is the number that every yield will every yield will be judged against.
• 0:54
  SPEAKER_00: Yesterday, Stone X issued their U.S.
• 0:57
  SPEAKER_00: corn yield at 184.8, slightly bigger.
• 1:01
  SPEAKER_00: This happens to be bigger than every other estimate that I have seen out there.
• 1:06
  SPEAKER_00: And with the recent hot, dry weather and the sizable drop in the condition ratings, nearly every yield estimate is, or every yield estimate that I have seen is something smaller than USDA's 183.
• 1:18
  SPEAKER_00: Matter of fact, the most recent condition ratings would imply a U.S.
• 1:22
  SPEAKER_00: corn yield around 182.
• 1:24
  SPEAKER_00: And I know we're kind of splitting hairs here, but the point is this the entire world is leaning towards a smaller yield than USDA's current 183.
• 1:34
  SPEAKER_00: Not bigger.
• 1:35
  SPEAKER_00: But then you had this Stone X yield that is bigger.
• 1:39
  SPEAKER_00: So today, this is a lot of people in the market questioning things.
• 1:43
  SPEAKER_00: And on top of that, there are many people in the corn market that are questioning USDA's latest corn planted area.
• 1:50
  SPEAKER_00: We did not have this year, we did not have any major area with slow wet planting issues.
• 1:59
  SPEAKER_00: So therefore we didn't have any big prevent plant area this year.
• 2:03
  SPEAKER_00: And USDA current estimates that the total row crop planted area in the U.S.
• 2:08
  SPEAKER_00: this year is down 2.3 million acres.
• 2:12
  SPEAKER_00: So there are quite a few people leaning towards USDA raising the corn planted area, maybe even by a million acres.
• 2:22
  SPEAKER_00: So if you look back through history, this type of increase in corn area is extremely unusual this late in the year.
• 2:31
  SPEAKER_00: But with a widening range of yield estimates as of this morning, and now you've got this question on planted area, this makes for a very, very volatile USDA crop report next week.
• 2:45
  SPEAKER_00: Moving on to soybeans, the Stone Egg soybean yield was 53 bushels an acre.
• 2:51
  SPEAKER_00: This is the same as USDA's trend yield that they've been using forever.
• 2:55
  SPEAKER_00: And I've got a chart of all the corn and bean yields on uh the bottom of page one that you can look at.
• 3:02
  SPEAKER_00: Um but either way, uh well and and let's go back on beans here for a second.
• 3:09
  SPEAKER_00: The as we discussed yesterday, the current condition rating, U.S.
• 3:13
  SPEAKER_00: crop condition rating, would imply something a little bit bigger than a 53.
• 3:18
  SPEAKER_00: But either way, 53 bushels or uh an acre or higher gives us the biggest soybean crop ever in the United States.
• 3:25
  SPEAKER_00: So now it comes down to demand, which we've discussed is monster huge, right?
• 3:31
  SPEAKER_00: But none of this is really new information.
• 3:34
  SPEAKER_00: Today, the CBOT soybean market is more about technical points and moving averages than it is about crop numbers.
• 3:41
  SPEAKER_00: Uh speculators had plowed into long positions in soybeans on the way up several weeks ago, and the sell-off in November futures now has it moving back through some moving averages and technical points uh late yesterday and overnight.
• 3:56
  SPEAKER_00: So those same traders that plowed into long positions are now exiting those recent long positions.
• 4:04
  SPEAKER_00: I'm still in the camp that this soybean crop in the United States has a long, long ways to go to be made.
• 4:09
  SPEAKER_00: And the weather forecast is okay, not great.
• 4:13
  SPEAKER_00: Um, this strong, this crazy strong demand, I still think it should keep prices well supported until we get later down the road and we learn more about this U.S.
• 4:24
  SPEAKER_00: crop.
• 4:25
  SPEAKER_00: But again, we've got to deal with this U.S.
• 4:28
  SPEAKER_00: crop report in middle of the next week, and it's almost a guarantee that that's going to be a volatile, volatile report.
• 4:35
  SPEAKER_00: It almost always is.
• 4:37
  SPEAKER_00: Moving on to weather, um, this rain system coming across uh parts of Iowa and northern Missouri into Illinois, Indiana.
• 4:47
  SPEAKER_00: This has gotten a little bit bigger, a little bit broader coverage the next several days.
• 4:51
  SPEAKER_00: And then next week, the central and eastern corn belt uh gets a pretty good soaking of a general one to two inches.
• 4:57
  SPEAKER_00: Uh so net net, what this does is it leaves the plain states and parts of the western corn belt needing more moisture.
• 5:06
  SPEAKER_00: Um they kind of get shorted.
• 5:08
  SPEAKER_00: Temperatures continue to be hot, particularly southern plains, and it moves over into some of the uh uh the Delta states um the next several days, Arkansas, Mississippi, uh up into parts of Missouri, and then spreads north up into the to the central and northern plains as well, uh, with with several days of hundred-plus temps uh back in Kansas again.
• 5:32
  SPEAKER_00: So the plain states um continue to suffer.
• 5:36
  SPEAKER_00: The mid-south, obviously, the crop is much further along, so it doesn't have as much impact, particularly on corn.
• 5:42
  SPEAKER_00: Uh, you've got actually got some corn harvest uh occurring down here now.
• 5:46
  SPEAKER_00: I do have a chart on the bottom of page two that everybody needs to take a look at, and it's the Mississippi River at Cruthersville, Missouri.
• 5:54
  SPEAKER_00: The the first off, the river has dropped 14 feet in three weeks.
• 5:59
  SPEAKER_00: That's a big drop.
• 6:01
  SPEAKER_00: The forecast is for two weeks from now it to be down to three foot in Cruthersville.
• 6:07
  SPEAKER_00: That's the second lowest that it has been in the last 25 years.
• 6:11
  SPEAKER_00: The only year that is lower than that is 2012.
• 6:14
  SPEAKER_00: That was the major drought year uh in the basically the western half of the United States.
• 6:18
  SPEAKER_00: So if this projection does not change, if if we keep sliding lower and lower and lower, at some point in time this could impact U.S.
• 6:29
  SPEAKER_00: grain exports.
• 6:30
  SPEAKER_00: This is something we really, really need to be keeping an eye on.
• 6:33
  SPEAKER_00: That's it for today.
• 6:34
  SPEAKER_00: Thanks for listening.
• 6:35
  SPEAKER_00: We'll be back tomorrow.