Market Plus: Mark Gold

Aug 20, 2021  | 11 min  | Ep4701 | Podcast

Podcast

Yeager: This is the Friday, August 20, 2021 version of the Market Plus segment. Joining us now is Mark Gold. Nice to have you here, Mark, again. I was telling you between the breaks I always have to kind of pigeon everybody through a general statement of sorts, follow the commodities and you don't get to do a general statement. Let's start with that. What's on your mind this week?

Gold: Well, I would say the action in the grains was really very poor. When you have the August 12th report come out, as friendly as it was, and now we've closed under it where the market was the day before the report, it's telling you that there is something fundamentally wrong with the pricing. And the fact that the Chinese brought roughly 2 million metric tons of beans this month and we're still 75 cents lower and well under the report it tells you, again, there's a problem with the soybean pricing out here and the corn and I think it's an issue particularly with the funds still long 230,000 contracts of corn.

Yeager: Okay, you want to play conspiracy theory? Is there something cooking? Are we making up for what maybe didn't make sense for the last six months?

Gold: No I don't think so. I think markets build up a lot of anticipation when you've got tight carryouts and the what if scenario -- what if it's hot and dry? Well, it is hot and dry, it has been hot and dry in a lot of the areas. But I guess we just can't forget how good these genetics are. Guys, thank your local seed dealer for what they're able to give you to put in the ground to get these yields despite what have been really tough conditions out here. So, I think the market is just telling us that the yields are better. Demand may be down whether it's because of ethanol or maybe the Chinese stopped buying, they didn't buy anything on Friday for the first time in a while. So certainly crude oil is weighing on this thing and COVID. So there's a lot of negative factors and the market is reacting like you would expect it to react.

Yeager: Let's start with some of our Facebook and Twitter questions and we're going to open it up first on Twitter. Fund Manager who is known @GrainTrend, is it safe to say crop size only matters after the commodity risk off play is past?

Gold: Is it safe? No. Look at the lumber market. Lumber went from $400 a board foot to $1400 back down to $470. When is risk off? Where did that stop? So, I've always said commodity markets could go to extremes that people would never believe they can and higher highs and lower lows than people would expect. So risk off of the funds growing out of their longs. They haven't in the corn. So I don't see risk off as it has happened yet in the corn. The beans somewhat, the oil, the meal, the wheat, certainly it has come off. But the corn is still an issue as far as I'm concerned.

Yeager: I was at the Iowa State Fair a lot over the last week, talked to many different producers and one was in Northwest Iowa and this question comes from Orange City. It's Mitchell in Orange City and in his area they could use some rain. Along with lower crop conditions and many consecutive exports this week beans continue to fall in price. Why? Is this seasonal trends? I guess let's re-hit that issue we talked about on the program.

Gold: Well, certainly the crude oil prices have pushed soybean oil down to lows we haven't seen in quite some time. Palm oil has backed off as COVID is ravaging a lot of different areas. India it doesn't look like they're in bad shape in terms of crop. So the demand for palm oil has dropped, crude oil has pushed down soybean oil and it looks like the bean yields are going to be a little bit better than what the government is telling us. So you've got some demand issues out here, you've got more production, funds are still long oil and beans and it continues to be an issue out here. So, I don't know what to say except these things on a seasonal basis as we get into harvest are we going to see it improve? We talk about this a lot every year. They're selling Rosh Hashanah, the Jewish New Year, and buying it back 10 days later on the Jewish Day of Atonement on Yom Kippur. Well, Rosh Hashanah is early this year, September 5th, a week from Monday. So could we see that seasonal play in here with the funds still long and bigger crops anticipated? If we get these rains that we're expected over this weekend I think we're in for some seasonal selloff yet.

Yeager: Is there anything I can do as a producer to protect myself or ways I can guard against what's going to happen?

Gold: At this point on this kind of a break we're still looking at new crop corn at $5.30. That's not a price to turn your nose up at considering we started this year at $3.85. So is it worth buying some December puts? They're not cheap at this point but you've got to do something. Or be willing, if you know you've got the grain out there, be willing to sell it and buy back some call options through March to keep the upside open.

Yeager: All right, always good to hear that option. Phil in Dresden, Ontario is asking us about the dollar, the U.S. dollar, is at its highest level since last November. How will this impact both non-commercial and commercial interests? And how will they manage their short futures positions in both corn and soybeans? Based on current weather is the crop made now?

Gold: The crop isn't made now but a couple of good days of rain over the weekend and Monday it's going to be in a position to have the yields that we're looking at from Pro Farmer unless there is a frost or an early freeze or some kind of hail storm that would be devastating out here. If we get through this weekend with a lot of rains the crop is made. What were some of the other parts to that question? It's multi-level there.

Yeager: The U.S. dollar is at its highest level since last November. How will this impact both non-commercial and commercial interests? And how will they manage their short futures positions in both corn and beans?

Gold: Well, it's certainly going to make exports more difficult, which means the commercials are going to be having a tougher time selling the grain and for the American farmer if exports drop because of the higher dollar it's not going to be good for the American farmer. So I don't see a higher dollar as a positive any way you look at it whether you're a commercial or a non-commercial.

Yeager: But I kind of pinned you down right at the end of the program with not a lot of time to explain yourself. Dollar, higher or lower next week? You said higher. How much higher? And for how long?

Gold: Well, it pretty much depends on the Fed I think. There's talking about easing. I think we're going to get back to a little bit more normal pricing out here. I think the bonds are way overvalued where we're at now. I think inflation is, if you don't think inflation is out there look around because all I see is inflation everywhere I look and that to me tells me that higher interest rates are coming. If the Fed backs off that should tell us that bond prices are going to move lower and rates are going to move higher. Now, how is that going to affect the dollar? The dollar is telling us that regardless of what the bond market is going to do that there is strength in this dollar. Now, is it going to continue? I don't really know. Technically we closed pretty well, we closed a few ticks lower on the day, but still at relatively high for the week. The charts look strong. It's the wrong time of the month. We should make our highs the last Friday of the month so we could have another week or so of higher prices. Where it goes from there is anybody's guess.

Yeager: Let's finish with a Facebook question from AJ in Protivin, Iowa. He's asking, are we going to get an opportunity to roll December corn hedge-to-arrives at more normal carry levels?

Gold: It depends on where you're at. The basis is going to be a funny animal this year because grain is tight and you've had this severe drought, basis should stay pretty tight. Where you've got more than expected grain the elevator is going to know that and back basis off. So I think that is about as much a function of where you are and what kind of situation you're in as it is anything else. Are you going to get a chance to roll it? It would take a big uptick in the market I think to be able to do that. In the meantime, how much are you going to give back trying to wait for a lull that may or may not be there. If you've got a decent basis market the grain and buy back some call options. I'm never a big fan of storing grain unless you do capture the carry. But I don't know that there's enough there to really pay the carrying charges. So I think you always have to consider that. In general I never encourage farmers to store grain, I encourage them to sell it and reown it with call options.

Yeager: It's a lot easier to store paper than it is grain sometimes.

Gold: It sure is.

Yeager: All right, Mark Gold, good to see you. Thank you so very much for the insight.

Gold: Thank you. Have a great weekend.

Yeager: You too. Next week we'll be back and we will look at the economic impact of this season's drought and also the wildfires and Naomi Blohm will join us to analyze the markets. Thank you so very much for watching. Have a great week.

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