Market Plus: Mark Gold

Apr 15, 2016  | 00:10:49  | Ep4134 | Podcast

Podcast

Pearson: This is the Friday, April 15, 2016 version of the Market Plus segment. Joining us now is Mark Gold. Mark, welcome back.

Gold: Nice to be back.

Pearson: Yes, happy day after Tax Day to you. We do have a lot of great questions from our viewers here on Twitter and social media, but I wanted to get your thoughts first on the cotton market. We saw it hold $60 this week. Where are we going from here?

Gold: Well, you know, we really need to draw some acres into cotton. We've got a lot of cotton out there, which is why we've had such cheap prices and such a struggle to get out of here. But the fact of the matter is when you talk to folks down south, cotton is the last thing on their mind, which tells me that the market is going to want to draw some attention to it. And the way you do that is through higher prices. So is there some hope particularly as this soybean market rallies to rally that corn to keep those acres what they've got there? Yeah, I think there's some hope there. So I don't want to be too bearish the corn down here. The weather has been real iffy in the south. You've had a lot of rain eastern Texas into Louisiana. Can that make a difference? I think that's one of the reasons why we're kind of staying firm. But, again, when you tie that in with the soybeans I think there's a chance in this cotton market. I wouldn't be overly bearish, not this time of year after everything it has been through.

Pearson: Okay. Now you mentioned on the show we haven't seen this soybean rally pull any acres from corn yet. Do you think it has changed any of these cotton acres to beans?

Gold: That's a possibility. A lot of guys, from what I understand you want to go buy a cotton planter down south, there's plenty of them. And certainly the higher priced beans is going to attract some attention. And that could be an issue. And, again, the more we drive it out of cotton into beans the better the chance the cotton has to really out here.

Pearson: I want to get to our questions here. I wanted to start with we talked on the show about Brazil's troubles. We've got them possibly impeaching their President or her resigning, we've got the real strengthening on that news, which is bizarre. But we've got a question here from Marty in Buxton, North Dakota, @SatMonstor on Twitter. He is wondering, what percentage of beans are sold in Brazil? At this time in the year where would we be on their sales?

Gold: I think it's really hard to get a good number on that. But could they be 40%, 50% sold? I think so. The interesting thing about Brazilian exports right now, I've got a very good friend who is in touch with these markets all around the world and maybe one of the greatest grain traders that has ever been around and I'm hearing word that he expects to see demand pick up in the U.S. in the summer months kind of unexpectedly because he believes that Brazil is going to stop exporting and wait to see what happens here. So maybe we're still several weeks away from that happening but that could be a push towards U.S. exports and that, again, could help the beans. Everybody is hoping that it's a La Nina rally in the beans, well maybe it will be something else out here. So I think it's something to keep an eye on, whether Brazil really does start to shut off as we head into May and June.

Pearson: And would they shut off just because they can in the hopes of higher prices?

Gold: Yeah, they understand this weather game as well as anybody. Do they want to be selling $9 and $10 beans if we're about to have a problem here and beans are going to spike to $12 or $14? So are they going to try to keep something in reserve? Yeah I would think so and it makes some sense. So could we pick up a little bit of export business unexpectedly? Let's hope so.

Pearson: Okay. That is something to keep an eye on. That would be a welcome gift for a lot of these guys who have been watching bean prices be so stagnant for so long. Now we also talked about this corn rally we've got going on. And Chad in Randalia, Iowa, @hort4cy on Twitter is wondering, regarding this corn rally, why? How long will it last? And what is the upside potential? Now you talked about that on the program, probably a two week here of potential for upside. What tripped this market? We saw beans take off six weeks ago and corn just flobbled along. What kicked it off here?

Gold: Short covering by the funds is the only way to say it. They were short over 200,000 contracts. As of tonight they're short about 150,000 contracts, maybe a little bit less because the numbers are about a day or two behind. But the fact of the matter is this has been a short covering rally. We don't need corn prices to move higher and encourage guys to plant more corn out here with 93.6 million out there potentially. So I've always said, we want to take advantage of the funds before they take advantage of us. So now if we can get these funds to rally and get them kind of even in this market, over the next couple of weeks and we maybe put another 20 or 30 cents under this market, as a marketer and a risk manager, do we want to do something with that rally? You bet we do. And either by moving our puts up, making cash sales along the way, looking at different levels, absolutely because all we're going to do is encourage guys to plant more corn. If there isn't a weather problem then we're looking at corn coming out of our ears this fall. And, again, this may be the one marketing opportunity in this next couple of weeks. Now, maybe we get another one in June and July if we do get hot. Well let's make sure we get at least a third, depending on where we go even maybe up to a half of our guaranteed bushels priced on a nice rally out here.

Pearson: Now, as we take a look at this 93 and change million acres that USDA has floated, with decent weather, as you mentioned, corn coming out of our ears, we're going to see pretty big basis implications, particularly in the Corn Belt. Would that change your thinking to make cash sales versus sales on the board? Or how would you handle that decision when we get this rally continuing?

Gold: Well, we like to look at the basis when we do get rallies. Sometimes they'll bleed some of that out of it. If the commercials are sensing that there could be some shortages, I can't imagine why they'd think that at this point, but maybe we can get a bump in the basis out here. I would probably be inclined, if the basis is realistic, and what is realistic here in Iowa, 40, 50 under, I'd probably go ahead and do some cash sales and just be done with that part of it. But if we do get a rally in the basis, certainly between now and July, that is when you want to start looking at doing some basis contracts, 30 under, 20 under, and locking in that basis and making sure that if we wind up with a big crop and basis goes back to 60, 70, 80 under that you've gotten that taken care of as well. There's two markets we always have to focus on, the cash market and the futures market.

Pearson: You bet. Now we've got a question here from Chris in Minnesota, @cswenson13 on Twitter. He's wondering, where are we at in the cattle cycle in regards to price? Are we near the bottom or is there a long ways yet to go?

Gold: Well, again, I don't like trying to pick bottoms in these markets, particularly where we know that the bottoms can be in the cattle market and we know that production has been steadily increasing, not only in the numbers of animals that were calved this spring, but in the weights as well. And as we mentioned on the show, the stock market has been incredibly strong, which should be a good indicator of demand, but the cattle market has slipped back. That is not a good sign. IF we start taking out those lows, which aren't terribly far away, then we could have significant downside risk out here. So, again, I think there’s still more risk in this cattle and in the feeder cattle market.

Pearson: Okay. Yeah, and just thinking live cattle we're trading close $122 and change on Friday, that low is only at $115 and a half in there. If we were to breach that from a technical perspective, Mark, what is the downside?

Gold: I hate to say this but I think it's $89 to $90.So there is still quite a bit of risk out here.

Pearson: And feeder cattle if we break through that $130s?

Gold: Then I think you're probably looking at $100, $105, somewhere in that range. But I think it's worth spending some money here. If you don't want to spend $5 or $6 on a put, fine, spend $2 or $3, get something on so you've got a little bit of comfort level not only for yourself and your family but for your banker as well and let's not turn this thing into a disaster, let's spend a few bucks to protect a small loss from turning into a big loss.

Pearson: Sure. We have the tools out there.

Gold: Right. And you still have the upside open to you, so if we do get something good this summer for whatever reason, grain prices tank and we rally this cattle market with a lot of people being short, great. Then we'll go ahead and sell some cattle.

Pearson: Now, speaking of selling some cattle and finding some demand, on the export news, this strong dollar has been just a headache for all the protein markets. We've seen pork respond a little bit better. Have we weakened this enough going into the summer to be able to find better export markets for beef?

Gold: I don't think we've done it yet. I think we've got the dollar, we made the lows just under 94 cents, rallied it back to close to $95. We've got to get this dollar down to 88, 89 cents to really get people thinking about it out here or see a rally in the other sides of the currencies, particularly in the far east. If we do that then we can have a better export demand out here. But we do have a lot of beef. We're going to be putting more beef out here. We've got to see a pick up in demand either domestically or internationally for the export market to see the cattle really get something good here, unless we have an issue in the grain markets.

Pearson: Alright. We need mouths to eat this beef and likewise pork as that herd continues to grow. Now, a final question for you, Mr. Gold, and you probably have a different take on this than the asker is wondering. This is from Matt in Nebraska. This is from Twitter. He says, how many games will it take for the Royals to beat the Cubs in the World Series this year? Now you're a Chicagoan, Mr. Gold, but what are your thoughts on the Cubs?

Gold: My thought is I hope it's four games that the Cubs lose in a row because I'm a White Sox fan. Now in Iowa it's not very popular to say that. But the fact of the matter, I grew up on the south side and went to White Sox camp as a kid. So I've been a White Sox fan. My sister comes into town and wants to go to a Cubs game, I'll get her tickets, but don't expect me to go with her. I mean, it's just something I don't want to do.

Pearson: It's in your blood.

Gold: It's in my blood. I'm a Sox fan. 

Pearson: Well, sorry to hear that, Mr. Gold. But thanks for joining us this week, always appreciate your insight.

Gold: Good to see you.

Pearson: Thanks to all of you for sending in your questions via Facebook and Twitter. Please continue to do so and we will get expert analysis right to you. Thanks for watching and have a great week. 

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