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Transcript

Daily Market Podcast Sep 4 · 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, September 4th.
• 0:07
  SPEAKER_00: Just a reminder: this is a three-day weekend with a Labor Day holiday on Monday, so we will not be open on Monday.
• 0:13
  SPEAKER_00: We will not be sending out a report.
• 0:15
  SPEAKER_00: We will return on Tuesday morning.
• 0:17
  SPEAKER_00: Walking in this morning, December corn is up a quarter at 541.
• 0:22
  SPEAKER_00: November soybeans are down two at 13.14 and a quarter.
• 0:26
  SPEAKER_00: December meal is down one at 354.50.
• 0:31
  SPEAKER_00: And October crude is off 80 cents at 90.40 this morning.
• 0:37
  SPEAKER_00: As far as corn news, when we walked in yesterday morning, CBOT corn was down 12.13 cents across the board, mainly on reports that Putin was open to peace talks with Ukraine.
• 0:48
  SPEAKER_00: But then corn very quickly rallied during the session following news that Russia had once again attacked two vessels in the Black Sea.
• 0:59
  SPEAKER_00: So this leaves the market with no clear direction on when or how grain could begin flowing out of the Black Sea again.
• 1:06
  SPEAKER_00: Meanwhile, corn planting has begun in Argentina.
• 1:10
  SPEAKER_00: Planning was reported at 1.5%, with most of that planning progress occurring in north and central parts of Santa Fe province.
• 1:20
  SPEAKER_00: So we need to be watching weather in Argentina now.
• 1:23
  SPEAKER_00: As we've stated in the past weeks, this corn market cannot afford any planting delays or any crop issues of any kind in South America.
• 1:32
  SPEAKER_00: Most of Argentina has gotten okay range the last two, three weeks, with the exception of Buenos Aires and La Pampa provinces.
• 1:39
  SPEAKER_00: I've got a map on the last page of where they grow corn in Argentina and the precip forecast for the next 10 days so y'all can take a look at.
• 1:49
  SPEAKER_00: As for U.S.
• 1:51
  SPEAKER_00: weekly corn sales, uh the sales were decent.
• 1:53
  SPEAKER_00: Mexico continues to be our largest buyer of U.S.
• 1:57
  SPEAKER_00: corn.
• 1:58
  SPEAKER_00: But it is interesting that Spain is now showing up to buy some U.S.
• 2:02
  SPEAKER_00: corn.
• 2:03
  SPEAKER_00: We fully expect Europe to be a major buyer of corn in the coming months, but due to their existing GMO laws, most of their corn will have to come from South America.
• 2:15
  SPEAKER_00: Typically, the uh main countries that buy U.S.
• 2:18
  SPEAKER_00: corn are Spain and Portugal because they have some different rules that apply them.
• 2:24
  SPEAKER_00: Meanwhile, U.S.
• 2:25
  SPEAKER_00: ethanol production remains pretty decent.
• 2:27
  SPEAKER_00: I've got a chart at the bottom of page one.
• 2:30
  SPEAKER_00: With this recent rally in fuel prices, ethanol margins remain pretty pretty good, fairly decent.
• 2:37
  SPEAKER_00: This week we have seen the corn market bounce around a lot.
• 2:40
  SPEAKER_00: It rallied to new highs and then gave back most of this week's rally.
• 2:44
  SPEAKER_00: As of right now, CBOT December corn is up four cents for the week.
• 2:49
  SPEAKER_00: With a long three-day holiday weekend and then a very important USDA crop production report next Friday.
• 2:56
  SPEAKER_00: I suspect corn really won't do much today and likely won't do much next week.
• 3:01
  SPEAKER_00: The market really needs to see what USDA has in their report.
• 3:05
  SPEAKER_00: Are they going to lower the basically are they going to lower the crop as much as the market has been looking for?
• 3:11
  SPEAKER_00: I remain in the camp that CBFT corn is high enough for now.
• 3:15
  SPEAKER_00: We may even set back some during harvest.
• 3:18
  SPEAKER_00: But breaks will be well supported, and we really, really need to be watching for any crop issues in South America that would be pretty bullish pretty quickly.
• 3:27
  SPEAKER_00: Moving on to soybeans like corn, the soybean market was quite a bit lower yesterday morning.
• 3:33
  SPEAKER_00: But soy soybeans rallied for a totally different reason.
• 3:38
  SPEAKER_00: Um USDA's weekly export sales report showed uh quite a bit of meal sold.
• 3:45
  SPEAKER_00: Matter of fact, the meal sales were huge.
• 3:48
  SPEAKER_00: The report showed the report yesterday morning showed the largest weekly meal export sales ever in one week.
• 3:56
  SPEAKER_00: This was a big shock to the market, and meal rallied quite aggressively.
• 4:01
  SPEAKER_00: And interestingly enough, quite a bit of this big meal export business was going to Europe.
• 4:06
  SPEAKER_00: So now the market will be ultra sensitive to any more EU meal buying.
• 4:12
  SPEAKER_00: Also, in the last several days, China has shown back up buying more U.S.
• 4:17
  SPEAKER_00: soybeans.
• 4:18
  SPEAKER_00: And as of now, the Chinese president Z is set to meet Trump at the White House on September 24th in roughly three weeks.
• 4:26
  SPEAKER_00: And it's anybody's guess how that meeting will go.
• 4:29
  SPEAKER_00: Like corn, I believe that CBOT soybeans will bounce around lacking directions for the next several days, waiting on this big USD report late next week.
• 4:41
  SPEAKER_00: Moving on to cattle comments here.
• 4:43
  SPEAKER_00: The story of the last several months continues in cattle.
• 4:46
  SPEAKER_00: Speculators continue to sell and get out of their long positions, and the cattle feeder continues to take lower and lower prices for their fat cattle.
• 4:55
  SPEAKER_00: But the cattle feeder has now backed himself into a corner.
• 4:59
  SPEAKER_00: Current breakeven in these main western cattle feeding states are mostly around 240.
• 5:06
  SPEAKER_00: And cash last week was 220, and this week will be steady to likely something lower.
• 5:11
  SPEAKER_00: And to rub salt in that already bloody wound, cattle feeders have been lifting their short hedges all the way down on this break.
• 5:20
  SPEAKER_00: The end result is that cattle feeders are losing their shirt right now.
• 5:25
  SPEAKER_00: And to make matters even worse, with a holiday on Monday and small kills next week, beef packers really don't need to buy very many cattle this week.
• 5:34
  SPEAKER_00: So the cattle feeder has fat cattle that he really needs to be selling, but he does not want to sell those and recognize a very large loss.
• 5:45
  SPEAKER_00: So that's a recipe for him to continue to hold on to cattle, feed them longer, and hope and pray for a rally.
• 5:54
  SPEAKER_00: But it's going to take a massive rally for him to get back in a profitable area again.
• 6:01
  SPEAKER_00: And now this bleeds over into feeder cattle.
• 6:04
  SPEAKER_00: We have long discussed that feeder cattle supplies in the U.S.
• 6:07
  SPEAKER_00: will remain tight for a long, long time coming, well into late 27 and likely 28.
• 6:14
  SPEAKER_00: But with a cattle feeder losing so much money, they don't want to and they don't want to recognize this big loss on Fed cattle and then turn around and buy a feeder that looks to be another financial loser.
• 6:26
  SPEAKER_00: In the short run, that is not good for feeder values whatsoever.
• 6:32
  SPEAKER_00: The summary here, we see Fed cattle prices staying low for a while, but I am still in the camp that by the time we get to early 2027, we should see Fed cattle supplies tighten up.
• 6:44
  SPEAKER_00: And that would be from months and months of very small placements.
• 6:49
  SPEAKER_00: And that will be bullish for Fed cattle prices and very bullish for feeder cattle prices.
• 6:55
  SPEAKER_00: But we got to get over this pain and suffering that we got to go through here in the next couple of months.
• 7:04
  SPEAKER_00: Also, and we really need to talk about this.
• 7:07
  SPEAKER_00: There has been a lot of conversation the last two weeks about beef imports and a lot of um how do we say this?
• 7:16
  SPEAKER_00: Maybe misleading information would probably be the easiest way to word that.
• 7:31
  SPEAKER_00: So his plan allows for tariff-free beef imports for 90 days for some 300,000 metric tons of beef.
• 7:40
  SPEAKER_00: And the market ran with this idea that here comes a giant wall of imported beef.
• 7:45
  SPEAKER_00: But reality proves to be a very different story.
• 7:50
  SPEAKER_00: Shocking, right?
• 7:51
  SPEAKER_00: A politician makes a statement, and maybe it's not totally true.
• 7:55
  SPEAKER_00: So let's review the facts here.
• 7:57
  SPEAKER_00: We import most of our beef from Mexico, Canada, Brazil, Argentina, Australia, New Zealand.
• 8:05
  SPEAKER_00: Under current trade agreements, Mexican and Canadian beef come in tariff-free.
• 8:09
  SPEAKER_00: So this deal doesn't apply to them, obviously.
• 8:12
  SPEAKER_00: And the quota for Argentina has already been increased by Trump earlier in the year.
• 8:17
  SPEAKER_00: And Australia and New Zealand, they won't hit their existing quota for several more months.
• 8:22
  SPEAKER_00: So the in this increase in this tariff-free beef really only applies to Brazil.
• 8:34
  SPEAKER_00: But Brazil's interesting.
• 8:36
  SPEAKER_00: Brazil hit their quota in January and they have been paying a 26% tariff ever since.
• 8:45
  SPEAKER_00: And that 26% tariff has not slowed down Brazilian beef one bit.
• 8:50
  SPEAKER_00: They are pumping that stuff in here.
• 8:54
  SPEAKER_00: So this 90-day tariff-free time period is really only thing it really accomplishes is it is saving a mountain of money for the Batista family that owns JBS, who is the biggest Brazilian beef producer and biggest exporter.
• 9:14
  SPEAKER_00: And we calculate this could easily sell save them 60, 70, 80 million dollars over the next 90 days for this one family.
• 9:25
  SPEAKER_00: That is a long way of saying that this tariff-free beef imports do not change anything for actual USB supplies.
• 9:35
  SPEAKER_00: That beef was coming here anyway.
• 9:37
  SPEAKER_00: It just saves one very rich family in Brazil a lot of money.
• 9:41
  SPEAKER_00: Really, all it accomplishes.
• 9:43
  SPEAKER_00: But the market shoots first and they ask questions later, as is normally the case.
• 9:49
  SPEAKER_00: I've got a chart on the bottom of page two, which is annual beef imports, and it shows a continued trend higher and higher and higher.
• 9:58
  SPEAKER_00: Year-to-date beef imports are up 16% from a year ago.
• 10:03
  SPEAKER_00: And if we keep up that pace, that we will import 6.2 billion pounds of beef in 2026.
• 10:11
  SPEAKER_00: That number is now getting big enough that it is changing the landscape of the U.S.
• 10:16
  SPEAKER_00: beef market.
• 10:17
  SPEAKER_00: But that beef was coming into the U.S.
• 10:21
  SPEAKER_00: with or without this cutting tariffs.
• 10:23
  SPEAKER_00: This tariff-free 90-day period makes zero difference on the amount of beef that will flow into the U.S.
• 10:30
  SPEAKER_00: this year.
• 10:32
  SPEAKER_00: So on to weather again, far north of the Corn Belt continues to get uh pretty decent rains.
• 10:38
  SPEAKER_00: Um, Minnesota, Wisconsin, and Michigan.
• 10:42
  SPEAKER_00: Beyond that, most everybody else is lacking.
• 10:45
  SPEAKER_00: And we still got the heat in the Western Corn Belt and Plain States.
• 10:51
  SPEAKER_00: I've got maps in today for Argentina, being as corn planting has started down there of where they actually grow corn and the pre sale amounts for the next 10 days, if everybody take a look at.
• 11:03
  SPEAKER_00: That's it for Friday.
• 11:05
  SPEAKER_00: Y'all have a great weekend.
• 11:06
  SPEAKER_00: We'll be back on Tuesday.
• 11:08
  SPEAKER_00: Thanks.