Market Plus: Mark Gold

Nov 22, 2019  | 10 min  | Ep4514 | Podcast

Podcast

Howell: This is the Friday, November 22, 2019 version of the Market Plus segment. Joining us once again is Mark Gold. Mark, welcome back.

Gold: Thank you. Nice to be here.

Howell: Mark, we've got a lot of great questions this week on social media. It's crazy to think that people are already turning their attention to 2020 and what's coming down there. But to kick things off here we've got a question from Austin in Belmond, Iowa. When do those delayed and abandoned fields start to be factored into the USDA's acreage or yield reports?

Gold: I don't think we'll see the full extent of it in the December report, I think we'll see it in the January report. It's going to be final, final by then and those are going to be the numbers we have to work with. Are we going to see numbers that a lot of us think are not there? I don't think the USDA will be that aggressive. But I think certainly with the harvested acres and with what did or didn't get planted, what went into silage acres, we don't know those numbers yet but we should have a good number come January and hopefully we're going to see lower numbers, not only production, but lower yield as well and that could be the start of a nice market in January.

Howell: And it's crazy, I was talking to some producers this week that are saying, upper Dakota areas, that were saying it's probably going to be January, February, maybe even March until they get some of that crop out of the ground. How does that factor into the market? Do we see a delayed slump, I guess a post-harvest slump?

Gold: I don't think so. I don't think there's enough corn up there, just there that's going to make the difference. It's not only in the Dakotas that they've had problems but Minnesota, Illinois, Iowa, Indiana all having trouble getting the crops out. Illinois should get some good weather next week, guys should be able to finish up, let's hope. But I think the USDA is going to have a pretty good idea of what it is by the January report and those are the numbers we're going to have to live with.

Howell: And so we've talked a lot about the January report, we've been talking about it for it seems like two months, three months now. It's nearing. We're already almost into January here. But you also mentioned during the program that basis levels have also continued to be relatively strong for this time of year. So we've got a question here from Josh in Bloomington, Illinois. Should producers take advantage of the positive basis and relatively higher prices on corn or hold out for those adjustments that could be coming for yields and acres later on?

Gold: I think that's a good question. This basis is so strong but between now and the WASDE report, I think it's January 10th, we've got a good five, six weeks. A lot can happen to a market, if there's no trade deal, if things get tough, we know the Chinese are upset about the resolutions passed in Congress condemning the Hong Kong attacks. So is there a deal or isn't there a deal? If there isn't a deal and somebody gets tough about it this market could break another 30 or 40 cents. So would I keep a cheap short-dated put under it if I'm going to wait? I would. Like I said, I believe after the first of the year we'll see a pop but that may come at the extent of the basis backing off. So it's kind of a double edged sword, pick your poison. If you can lock in basis now for delivery in January I might do something like that if you can deliver after the 10th, that may be one way to handle it. But I just don't want corn sitting in the bin hoping for something that may not come just because there's a strong basis out there.

Howell: And so you menitoned there, what strategy would you be employing if you are locking in basis now to make sure that if there is some sort of bump here come January that they're able to take advatanage of that/

Gold: Well, certainly if they're going to be selling the grain I would be buying back call options. I want to keep the upside open after the first of the year for some of the reasons we've talked about. But I think there's good things coming next year. We've been in such a really a four year slump now in agriculture. I believe we're due to come out of it. It looks like there's a little bit of a potential head and shoulders bottom on the weekly corn charts out there. So I think we've got a chance in here. But again, as a risk manager, I'm not going ot tell somebody not to sell corn, I'm going to tell them if you've got it in the bin hold onto it, keep a cheap put underneath of it. You can spend a nickel and get something relatively decent for the short period that you're looking to protect.

Howell: Mark, as I mentioned we've got questions about 2020, a lot of questions about 2020 already. One of the other questions which shocked me that we're already thinking to this is the acreage mix for 2020, which seems crazy because this year's crop is not even out of the field yet. But we've got a questio here from Paul in Nebraska on Twitter. Assuming we don't have 20 million acres of prevent plant next year what does the acreage mix look like?

Gold: Well, we're going to see a lot of acres, there's no question about it. That keeps me on my toes to look for marketing opportunities that may come in the summertime because we are going to see a lot of acres. How much? I don't think we're going to see the kind of delays that we had, it would be unusual to see the delays we had this year. So can we boost corn 10%? Can we boost beans 5%? I think without any doubt those are the kind of numbers you could be looking at out here. But let's see what the WASDE report says. MAybe they're going to say we didn't lose those kind of acres out there and we don't have to add those back into the mix, which I think would be a little bit friendly in and of itself. But the fact of the matter is farmers are going to plant, just like they always do, and we're going to replace those lost acres and farmers want to get out there, plow the ground, plant the seed and harvest a crop. So we're going to see more acres. But I believe along with that we're going to see better demand not only in corn and beans but maybe wheat as well.

Howell: So do you see any acres being pulled away from wheat or cotton or another commodity to plant more corn and soybeans into 2020?

Gold: Well, cotton is a little bit of an issue for the soybeans. You've got 62 cent cotton out there which isn't going to get anybody too excited. But then again you've got $9 beans. Nobody is going to get too excited about that either. But the fact of the matter is I don't see where the real big shifts are going to come from. Are guys going to double crop whatever wheat was out there? That certainly could be a factor. We could see more beans beacuse there's just so low wheat acres. What are they going to do with that land? They're probably going to put it into bean sor corn so we could see a little bump from that as well.

Howell: Okay. Mark, we've got a question here looking at some more technical stuff. I actually thought it was named after you becuase it's called the Goldman roll. But Bradley in Upand, Nebraska would like you to explain the Goldman roll and how it changed the December and March corn and bean prices.

Gold: Well let's be very clear I have nothing to do with the Goldman roll.

Howell: But you could say you do.

Gold: Yeah, I could and everybody would know I was a liar. It's the Goldman Sachs rollovers. Goldman Sachs is one of the major players in commodity markets. They have funds and they generally trade them from the long side and a lot of these funds whether it's long or short they roll these positions, by law they have to roll them before you get in the delivery period. So when we get into November you're going to see them starting to roll the December and that is usually bewteen the 5th and 8th business day of the month. So they'll seel December and buy March. In this case they're short December corn so in this case they're going to be byuing December corn, selling March corn to roll those positions. Net, net everybody knows it's coming, everybody knows when it's coming and so I think a lto of guys, professional traders kind of get set to take the other side of those rolls where they can pick up a quarter, half cent on large numbers. If they are members of the exchange or have a real low commission rate they can afford to do that. So I don't know that it has just a huge impact on these markets in the long run. The Goldman Sachs rolls have been around for probably the better part of 20 years and rarely do we see it have that much of a difference. It's just a month-to-month spread and what they knock out of one side they put into the other side. So the spreads stay fairly calm except you will see Dec lose a little bit to March most likely in this roll. And on the January, when we get to January they really don't have any real positions at the moment, maybe long 20,000 beans in January. So in December will they start rolling out of those? Yeah, but 20,000 contracts isn't going to do much to the market.

Howell: So does this Goldman roll have any impact on basis prices or a producer taking a cash price on the spot, delivering to the elevator, will it impact any of those things?

Gold: I think anybody trying to make those decisions based on a Goldman roll is looking at the wrong thing. It's time to look at something else which I think could be more important but I don't see it being a huge impact on these markets.

Howell: All right, Mark Gold, thank you so much, always a pleasure.

Gold: Thanks, Delaney. Nice to be here.

Howell: Join us again next week when we’ll crack open a story about a wild North American crop and Elaine Kub returns to the Market to Market table. Until then, thanks for watching, listening or reading. I’m Delaney Howell. Have a great week!

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