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Transcript

Daily Market Podcast Sep 18 · 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 18th.
• 0:07
  SPEAKER_00: Walking in this morning, December corn is unchanged at 5.30 and a half.
• 0:12
  SPEAKER_00: November beans are down 11.5 at 13.08 and 3 quarters.
• 0:16
  SPEAKER_00: December meal is down 570 at 365.60.
• 0:22
  SPEAKER_00: October crude is down$1.20 at$96.10.
• 0:26
  SPEAKER_00: By the way, October crude is now$10 off its highs from just three days ago.
• 0:32
  SPEAKER_00: As far as corn goes, corn planting in Argentina is 11 is 11% complete.
• 0:37
  SPEAKER_00: That is the fastest start in at least the last 10 years.
• 0:41
  SPEAKER_00: Most of the planting thus far has occurred in the provinces of Santa Fe and Entre Rios.
• 0:46
  SPEAKER_00: Farmers in those areas are definitely taking advantage of drier soils and getting some earlier planning done.
• 0:52
  SPEAKER_00: There's very little rain in the forecast for the corn areas of Argentina.
• 0:57
  SPEAKER_00: As you can see, I've got a soil map on the bottom of page one that's worth taking a look at.
• 1:03
  SPEAKER_00: Soils are getting drier and they will soon need more precip.
• 1:08
  SPEAKER_00: That is not in the forecast.
• 1:09
  SPEAKER_00: This is something that we really need to be watching.
• 1:12
  SPEAKER_00: Meanwhile, the U.S.
• 1:13
  SPEAKER_00: corn market acts like it is waiting to see the results of this these meetings with the Chinese starting Sunday and through late next week.
• 1:23
  SPEAKER_00: Hopefully we are smarter after the end of these meetings next week.
• 1:27
  SPEAKER_00: Until then, harvest advances across the country, and that should provide some selling pressure on the market.
• 1:35
  SPEAKER_00: Otherwise, CBOT corn is just simply lacking direction.
• 1:41
  SPEAKER_00: Longer term, I remain quite bullish corn prices, but that's mainly in the spring and summer of 27.
• 1:48
  SPEAKER_00: As far as soybean news goes, U.S.
• 1:51
  SPEAKER_00: meal tightness was the major driver yesterday.
• 1:54
  SPEAKER_00: We've got several Western crush plants that have pulled meal offers and have slowed down, and a couple of them have even halted crush.
• 2:02
  SPEAKER_00: It seems that quite a few plants were running on the very last bean supplies from last year in their areas, and they very much were waiting on new crop harvest.
• 2:13
  SPEAKER_00: Well, this rain going across Iowan, Minnesota slowed down harvest before it even began.
• 2:19
  SPEAKER_00: But this open weather next week should allow for bean harvest in those areas, and this problem gets resolved very quickly.
• 2:26
  SPEAKER_00: As for bean oil, it looks like August and September imports of Yuco, which is used cooking oil, used going into these biofuel plants, has slowed down quite a bit.
• 2:37
  SPEAKER_00: This adds demand for U.S.
• 2:40
  SPEAKER_00: bean oil.
• 2:41
  SPEAKER_00: And this trade dispute with Canada also adds demand to bean oil because we run the risk of slowing down canola oil imports from Canada.
• 2:51
  SPEAKER_00: Slowing crushing this of these western western states the last couple of days does not help that equation either.
• 2:58
  SPEAKER_00: So for now, and then you've got all this these Chinese meetings, okay?
• 3:02
  SPEAKER_00: So for now, CBOT swimmings have a lot of moving parts, especially these Chinese meetings.
• 3:10
  SPEAKER_00: In the near term, I think we bounce around and trade mostly sideways, waiting for the next driver to pop up and see what where it's going to be pushing us down the road.
• 3:23
  SPEAKER_00: I recommend taking a look at the bottom of page one.
• 3:27
  SPEAKER_00: I've got some uh charts on Argentina corn, their planning progress, and soil moisture charts that are worth taking a look at.
• 3:35
  SPEAKER_00: As far as cattle comments this morning, watching this CME cattle price lately is like watching a super hyper kid playing with a yo-yo.
• 3:46
  SPEAKER_00: Futures rallied$14 over two weeks and then broke$10 in three sessions.
• 3:53
  SPEAKER_00: The rally in CME cattle in early September was mostly tied to futures being way below cash.
• 4:00
  SPEAKER_00: And it seemed that the cash was going to bottom out, and Packers had a margin, and therefore futures were very likely too low.
• 4:08
  SPEAKER_00: So futures rallied.
• 4:09
  SPEAKER_00: All made logical sense at the time.
• 4:12
  SPEAKER_00: But that rally needed a couple of things to happen.
• 4:15
  SPEAKER_00: We needed the beef market to remain firm.
• 4:18
  SPEAKER_00: It would help if the Packers had a margin and cash cattle actually firmed up.
• 4:24
  SPEAKER_00: But that was what the market was expecting, and none of that actually occurred.
• 4:30
  SPEAKER_00: And I've got a chart of beef prices on the bottom of page two.
• 4:34
  SPEAKER_00: And as you can see in that chart, beef prices have actually slid lower.
• 4:39
  SPEAKER_00: As a result, Packers' uh margins have gone to zeros.
• 4:43
  SPEAKER_00: A couple of them are running negative right now.
• 4:45
  SPEAKER_00: And the cash cattle market that was supposed to stage a rally only rallied$2 and then right out of steam.
• 4:52
  SPEAKER_00: None of this was good for the home team.
• 4:55
  SPEAKER_00: Meanwhile, you've got diesel and gasoline prices that are racing higher, and inflation talk is all over the evening news every night.
• 5:04
  SPEAKER_00: And this beef market feels like it is headed lower and lower.
• 5:08
  SPEAKER_00: Imported beef from Mexico and South America is coming in at prices much, much cheaper than U.S.
• 5:13
  SPEAKER_00: beef.
• 5:15
  SPEAKER_00: In this next statement, you really need to let this sink in.
• 5:19
  SPEAKER_00: We have seen some imported steak prices in the last week that are priced below the cheapest U.S.
• 5:28
  SPEAKER_00: steak prices of the last three years.
• 5:31
  SPEAKER_00: I'm gonna say that again.
• 5:33
  SPEAKER_00: We have seen some imported steak prices in the last week that are priced below the cheapest U.S.
• 5:41
  SPEAKER_00: steak prices of the last three years.
• 5:45
  SPEAKER_00: And specifically, if you look at some of these prices of imported roasts and eye of round, they are coming in at half price of the same U.S.
• 5:56
  SPEAKER_00: beef.
• 5:57
  SPEAKER_00: That's a bad deal.
• 5:59
  SPEAKER_00: There's no way to get around that.
• 6:02
  SPEAKER_00: As we're importing, I'm sorry, increasing this imported beef, we are no longer getting mostly stuff to grind.
• 6:09
  SPEAKER_00: That's what we've been getting for years and years.
• 6:11
  SPEAKER_00: It's mostly goes into grind.
• 6:13
  SPEAKER_00: Now we're getting higher-end cuts, and the food service industry and grocery industries in the U.S.
• 6:19
  SPEAKER_00: are liking these imported products more and more.
• 6:22
  SPEAKER_00: This is a problem, and it ain't going away.
• 6:24
  SPEAKER_00: The genie is already out of the bottle.
• 6:28
  SPEAKER_00: Also, let's talk about this cattle, these cattle coming in from Mexico.
• 6:35
  SPEAKER_00: Everybody's been worried that all of a sudden we get some huge cattle numbers and they open the floodgates.
• 6:41
  SPEAKER_00: That has not happened whatsoever.
• 6:44
  SPEAKER_00: The numbers so far have been very small, and I've got a chart of this on the bottom of page two.
• 6:49
  SPEAKER_00: It's well worth taking a look at.
• 6:51
  SPEAKER_00: So far, we have one location open, Douglas, Arizona, and Santa Teresa, New Mexico is expected to open September 24th.
• 7:00
  SPEAKER_00: Columbus, New Mexico will likely open at some point soon, but we just don't know when.
• 7:04
  SPEAKER_00: And officials have not announced any plans for any Texas points yet.
• 7:09
  SPEAKER_00: The summary here is not many feeders are coming in from Mexico, and that won't change anytime soon.
• 7:14
  SPEAKER_00: Mexican imports should remain way below recent years.
• 7:19
  SPEAKER_00: Also, USDA will issue their catalog feed report today, late this afternoon.
• 7:24
  SPEAKER_00: We expect the August placements in the feed lots to be down 5% from last year.
• 7:29
  SPEAKER_00: That'll be the second smallest August placement number in the past 30 years.
• 7:34
  SPEAKER_00: But we continue this pace of markings out of feed lots being slow.
• 7:38
  SPEAKER_00: We think they'll be down 4% from last year.
• 7:41
  SPEAKER_00: Net net, the number of cattle in the feed remains about 1% up from year-gill levels.
• 7:46
  SPEAKER_00: We have had month after month after month of small placements, and cattle feeders have held on to cattle long in their feedlards longer and longer.
• 7:55
  SPEAKER_00: And the next several months, we still have plenty of cattle to be marketed.
• 8:00
  SPEAKER_00: So from now to the end of the year, it's very likely going to be hard to rally the cash cattle market, particularly with this issue with the beef going on.
• 8:10
  SPEAKER_00: But month after month of small placements will eventually catch up with us.
• 8:14
  SPEAKER_00: And we feel like that could be quite bullish for the spring and summer of 27.
• 8:19
  SPEAKER_00: We would not be shocked if August 27 cattle contract trades back to 240.
• 8:26
  SPEAKER_00: Today, they're priced at 210.
• 8:28
  SPEAKER_00: That's going to be quite a rally coming.
• 8:31
  SPEAKER_00: As far as weather, of course, you've got this continued rain event across Iowa, Minnesota, southern Minnesota, southern Wisconsin, northern Illinois.
• 8:43
  SPEAKER_00: And then next week, again, is basically wide open across the cornbelt.
• 8:48
  SPEAKER_00: And as we move into the you know, further time period down the road, it looks like the western cornbelt has normal tight moisture, and the uh even the central and western cornbelt, maybe parts of the eastern cornbelt, northeastern and uh Michigan, Indiana, Ohio, maybe they start to dry out just a little bit.
• 9:11
  SPEAKER_00: But basically everybody else has okay moisture going forward to finish up this bean crop.
• 9:16
  SPEAKER_00: The item that we really need to be watching, I think, is South American weather.
• 9:21
  SPEAKER_00: Uh, we're trying to plant beans in Brazil, we're trying to plant corn in Argentina.
• 9:27
  SPEAKER_00: Um, central Brazil is bone dry, and that's not changing anytime soon.
• 9:33
  SPEAKER_00: And right now, it's not a problem.
• 9:35
  SPEAKER_00: Two weeks from now, it will be a major problem.
• 9:37
  SPEAKER_00: So we need to watch that one.
• 9:39
  SPEAKER_00: Central Argentina is getting dry as we talked earlier, and they need a rain, and it's just not in the forecast.
• 9:45
  SPEAKER_00: So, two weeks from now, on both areas, a major problem today, not so much.
• 9:50
  SPEAKER_00: We just need to watch it.
• 9:52
  SPEAKER_00: That's it for today.
• 9:53
  SPEAKER_00: Thanks for listening.
• 9:54
  SPEAKER_00: We'll be back on Monday.