Market Plus: Mark Gold

Jul 24, 2020  | 14 min  | Ep4549 | Podcast


Yeager: This is the Friday, July 24, 2020 version of the Market Plus segment. Joining us now is Mark Gold. Hello, Mark.

Gold: Hello, Paul. How are you?

Yeager: Well, I remember the last time we talked I believe there was some $11 hamburger near you. I know it was a little higher than normal. Have you noticed anything like that in the grocery store or anticipate that you're going to see that again given the events of infections going up here in recent weeks?

Gold: The hamburger prices have come down dramatically. Boxed beef prices have come down 400 down to 200 in that range so it has caused the hamburger prices to come with it. I don't think we're going to see that for a while as long as the abattoirs stay open, keep slaughtering cattle. I think it was just one of those three or four week deals that packers were making a fortune and they got away with it. So unfortunately a lot of that wasn't, didn't wind up back in the farmer pockets, but it is what it is and it was there for a little while.

Yeager: Let's stay with a little bit of the livestock industry when it comes to dairy prices. We had been on this incredible train up in Class III, last 2 weeks we have given a little bit of that. Is that a trend? Does 2 weeks make a trend here in dairy or are we headed back down?

Gold: Well, I don't know if we're headed up or down or not. There's one thing I do know. Every time milk gets to $23 you seem to go back to $12 or $11. Every time we get to a $12 or $11 we seem to go back to $21 or $23. I'd love to see it close over $23 one day, maybe push it up to $30 but I don't know that that's going to happen any time soon. As you know the milk market is much more cheese as anything else. And are we selling as many pizzas out there? We're selling a lot of pickup and delivery pizzas but it still doesn't make up for what is lost in the restaurants. So I'm a little bit skeptical of milk prices up here. Again we're at $21, $22, spend 30 cents a hundred, buy a put, protect the downside. If we go back to $16 or $15 milk you've got some protection there.

Yeager: We talked about weather a little bit, mentioned how dry it was. The drought monitor comes out on Thursday. The data ends the previous Tuesday. Coming out this weekend USDA is going to call producers and ask for crop condition reports. Yes they're different days. But why is it that a report might say conditions are excellent where there's drought? How is that a disconnect? That was a question that Dan asked us. I guess I'm paraphrasing here a little bit. He says, the drought map in Iowa doesn't seem to match the crop conditions. So he's asking, Mark, what gives?

Gold: Well, what gives it's a state rating and when you average the state where it's good you could be looking at 210, 220 bushel corn. Where it's bad you could looking at 130, 140 bushel corn. So we have to understand that it's a state average. So unfortunately we don't break it up in to a microsection to really get that good of a look at it. But we do know that there's some areas in Iowa that are certainly hurting, Western Iowa, West Central Iowa, there's that big hole in the maps that show it. And is the yield in Iowa there? I would say maybe what is happening in Eastern Iowa, particularly in the northeast, is offsetting some of those yields that we're seeing in Central Iowa.

Yeager: Producer Peter Tubbs was sharing an article from a rival publication today talking about why it doesn't rain on your farm. And if you're in Western Iowa you know, you think why doesn't it rain on my farm? There is an actual scientific reason for that. It's the moisture needs, rain needs moisture to happen and when it gets dry that's the tough cycle about these things. So if you're in these areas and you're stuck and say it's not going to be West Central Iowa forever, next year it might be Southern Illinois or Central Illinois, what do you do if you're in that situation where I'm in a drought but everybody else is not?

Gold: Get into church on Sunday. I wish I had a better answer for you. But the Lord giveth and the Lord taketh away. And a little time spent in church praying for some rain doesn't do you any harm. But seriously there's nothing that we can do. You go in these cycles where it's dry, it stays dry, where it's wet it creates that moisture you were talking about. We're going to get this apparently huge storm in Hawaii over the weekend, they say it is the largest storm in the planet at the moment. Is that going to be able to move things around enough to affect the U.S. mainland? We don't know. But things can change. I hope the guys that are dry get some rain. It has been a tough enough couple of years where you don't want to be the one guys in the state that are not getting that rain. It makes a tough job that much tougher.

Yeager: Phil in Dresden, Ontario has a soybean question that is also tied to weather. He's asking, November beans closed Thursday at $9.03. With the critical August rain timeline in front of us, should farmers hold the line on sales or sell big into any weather rally?

Gold: Well, I want to see how this market acts this next week. I exercised some calls today in the August calls. I think there's some upside potential in here. So do you sell all of it now? No. I would look at buying some kind of cheap put, September put, to get you through the next three to four weeks, hope you don't need it if the market moves dramatically higher. But if we do get the rains in August it's going to be hard to rally this market. Now, will the Chinese step up and buy enough in that time period if we do break? That has been their habit. They don't reach up and buy rallies, they buy breaks, so if the weather gives them an opportunity to buy more on a break that's what they're going to do. But you feel terrible if you’re sitting there and haven't protected anything and the market is heading down. That's why some of these short-term puts can make a big impact on your marketing because you feel better, you've got some protection there, the market is going down, you're saving some of that dough.

Yeager: There's a question from Doug and it's one that has really kind of gotten the attention of many people and it's a little bit about what you just said. Doug is asking, I wonder if in lieu of escalating tensions between the U.S. and China if China will push up the buy of products?

Gold: I don't see that big time right now. I don't think they want to give the President the leg up and let the President get on a pedestal and say the trade deal was great, look at how much they're buying, not with the tensions that are going on. So I don't see them frontloading the sales as much as they could. As I've said, they're going to buy what they want to buy when they need it and that's going to be the case. After the election then we could see the big spurt of buying. They want to increase hog production, Chinese corn prices are through the roof, so they need feed and hopefully the U.S. is going to be the market. But are they going to really frontload this thing and let this thing really take off now? I think they're much more likely to wait until we get into harvest, put some harvest pressure on the grains and then watch them step up and take a lot of grain at cheap prices.

Yeager: I get this question almost every week following any time we talk about China, people asking me, why should we even be dealing with China in the first place? It's a country that is not human rights friendly, they are not good at doing business with us on what we like to consider, citing things like that. There are a lot of consumers, that's the short answer, right, in why we do business with them?

Gold: That's the short answer.

Yeager: The longer one we could go for an hour or a day and discuss, right?

Gold: They need the grain, they're our trading partners. Yes, we have been abused in the process and yeah they do a lot of really nasty things to their people and it's a Communist regime. But the fact of the matter is if you can use products like our grain to help make peace and to make things a little bit less tough around the world I think that's a good policy. I've always been a big negative kind of guy when we use our grain in politics. Jimmy Carter did it, that was a disaster, these tariffs have been very tough on the American farmer. Let the food go where it needs to go, keep the politics out of the food. Put the politics somewhere else, electronics or you name it, a million other places. But it always seems like the easy target is agriculture.

Yeager: Let's move on to wheat before we both get into trouble. $6 wheat. Troy in Wisconsin, he's asking, is $6 wheat fact or fiction? Looking mainly at the July and September contracts of 2021. What do you see there?

Gold: Well, fact or fiction. The way these spreads are going, the way they're having problems in the Black Sea areas, the way the dollar is going, it certainly isn't fact right now. We don't have it. Is it fiction in that it can't happen? Absolutely not. So guys have been sitting on wheat a long time, I think we're going to get an opportunity to sell more wheat on these rallies and you don't want to be a pig about it. There’s still plenty of wheat around the world. So you sell them some wheat and buy back some call options to keep the upside open. Just manage the risk out there.

Yeager: All right, well I've got to manage a risk question a little bit from Scott in Wisconsin and he's asking about December 2021 corn. Would you go long on that contract at current prices or wait for a lower price? Would you cover your feed needs for livestock for the year at these prices or wait for another leg down?

Gold: I don't see anything wrong covering feed needs in the low 3's, which is basically where we're at. Can we go to $2.80? Yeah, I suppose we can. But something happen to push us back up to $5 or $6 corn, just look at the Chinese corn prices. It can happen and it can happen in a hurry. There are a lot of things that can change in this market on a dime and I don't want to be the guy that is making massive commitments in the lower third of historical pricing. I want to be the guy that when we get in the upper third that is where I want to do the heavy marketing. So I wouldn't be in a big rush to do it here. Hopefully some of the government programs will help you get through this. It's going to be tough, there's no question about it, but if for whatever reason whether it's a banking issue or whatever issue you might have and you want to sell or need to sell grain here I would certainly look at reowning it with call options and keep the upside open. One thing we haven't talked about is this whole inflationary cycle that could move these markets in a big way and people may just not understand what is going to be happening here. But if this inflation hits like I believe it can hit that can add a lot of change onto these prices that we're seeing in the grains and in the livestock.

Yeager: I've got a follow up and I was going to maybe skip this question and I shouldn't. Aaron was asking on Twitter, we all know how cattle can follow major stock market moves and trends. But what happens to the grains if stocks crash this week into the end of August?

Gold: Well, if the stocks crash the cattle market is going to be very tough. Like I said, we're on a $20, $21 rally, I don't like the way the whole COVID thing is going, unemployment numbers have a little bit of an uptrend. I think that gets a little bit worse before it gets better. We're closing down, like we said, California, Arizona, Texas and Florida. None of that is good for the meat markets. Buy on a rally, buy some puts, protects the downside, hope everything is okay.

Yeager: All right, Mark, I appreciate your time as always. Good to see you.

Gold: Good to see you, Paul. Thanks very much for the opportunity.

Yeager: Mark Gold, thank you so much. That will do it for this installment of Market Plus. Next week, a look at pairing existing businesses with new owners in rural areas and Sue Martin will join us to analyze the markets. I’m Paul Yeager. Thank you so very much for watching, listening or reading. Have a great week.

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