Market Analysis with Mark Gold

Yeager: The European Union’s tariff considerations on Russian wheat boosted the outlook for U.S. producers. For the week, the nearby wheat contract added 26 cents and the May corn contract gained three cents. Both meal and oil contributed to the upside in the soy complex before the gains were erased Friday. The May soybean contract lost 6 cents while May meal improved $4.40 per ton. May cotton shrank by $2.42 per hundredweight. Over in the dairy parlor, April Class Three milk futures fell 42 cents. The livestock market was mixed. April cattle added a quarter. April feeders cut 63 cents. And the April lean hog contract declined $2.35. In the currency markets, the US dollar index strengthened 104 ticks. May crude oil added 4 cents per barrel. COMEX gold rose $3.10 per ounce. And the Goldman Sachs Commodity Index lost almost a point to settle at 574.20. Joining us now is regular market analyst Mark Gold. Hi, sir.

Gold: Nice to be here again.

Yeager: You know, this wheat market has been looking for a story. Did you see tariffs as part of the playbook that might give it some optimism?

Gold: I didn't see those tariffs coming, but it doesn't surprise me once it's there. And it hasn't been etched in stone yet, but it should be. And certainly, there's two thoughts here, they want a healthy European farmer, the wheat prices it will help the U.S. as well, but the other thing is taking income away from the Russians for their war against Ukraine. So, I think it's a two-pronged attack and I think it's worthwhile to do and I think it's going to really kind of change the dynamic of this wheat market because Russia has just been dumping so much on us.

Yeager: And that has been the story weeks and weeks at a time. Now, this weekend the story is about weather. We shift to some rain and some snow and colder temperatures on the U.S. crop. What does that mean for the market?

Gold: I don't think too much right here right now. But Iowa, where we're sitting here today, it has been a very dry state and some of the worst drought in the northeast part of the state. It looks like we've had some pretty good rains here today, maybe over the weekend into Tuesday could get some more rains, so I think that put a little bit of pressure on the beans. But overall, it's way too early to be talking a weather story. We've had phenomenal, phenomenal winter weather. Spring weather it was good up until this week. We got cold, had some snow. But we're still in March.

Yeager: In your state of Illinois, we always hear Matt Bennett last week said he had heard about people south of him, south of Champaign already planting. Are you hearing some of those same stories?

Gold: Not in Illinois, but it doesn't surprise me. You buck up against the insurance date, which is about April 10th, and are guys going to risk it going in early? If the weather is there, some guys will do that, there's no question about it. But I think with this last cold snap they're a little bit more inclined to wait, see if we can warm up back into the 50s and 60s and then they're just going to be gangbusters planting corn.

Yeager: Corn is the topic of the majority of questions this week, Mark. But I want to start first with this sideways action that we've been having. Do you anticipate or see anything that will break us out of sideways?

Gold: Well, certainly there are a couple of things, if the weather stays rough in Argentina, they keep losing crop size according to our estimates, and at StoneX they keep a pretty good track on that. It looks like it's going to be decreasing. So that is something to keep an eye on. The safrinha crop in Brazil, they've had some rains, it has been dry, it kind of goes back and forth. But they're still going to have a pretty good-sized crop. But overall, there's still the driving force in the corn market is the funds. They're still short 250,000, 260,000 contracts of corn. When are they going to cover? We just can't get the charts to turn quite friendly enough. If we could close the nearby corn, the May contract over $4.46, we got up to $4.45 and three-quarters overnight, if we could close over $4.46 that would be, in my opinion, a good push for the funds to say okay. Now, I heard today some people thought the funds had been big buyers and covered a lot of these short positions. I haven't seen the commitment of traders report yet, but I haven't seen it on my daily accounts, but something is going to shake these guys out at some point.

Yeager: Well, and those who are still sitting on old crop, I've heard you talk about it a little bit, hold on for those in the back of the pew. But let's ask this question Mike in Iowa wrote and wanted to know from you, Mark, this has been a nice little rally on the corn off of the lows. On unpriced old crop, should we sell into this before the report, which would be next Thursday? And if we sell, what would you recommend to do if the report was bullish?

Gold: Well, I don't want to play that game of what's going to happen if it's bullish. What I would say is we're in a 40-cent rally in corn. It has been a nice little rally. We actually took the opportunity to sell a little bit more, just another 5% more, old crop. We don't have much left. We actually sold some beans. We sold some new crop beans. Haven't quite gotten to our levels on new crop corn yet. But the question is, would I be selling before the report on this rally? Yeah, I would certainly let go of some, reward the market. But I think you have to make the decision, if you wait until after the report and it's a bullish report, any option trade you're going to look at is going to be a heck of a lot more expensive than it is before the report. I would say if you're going to sell it and take advantage of a 40-cent rally, spend 10 cents, buy some kind of corn spread, a call spread to keep you in the game. If it's a bearish report, yeah, you'll lose the dime, but at least you sold some corn at good prices.

Yeager: It sounds like you're saying, a little bit of action on corn. But I'm also curious about soybeans. Given what happened on Friday, the dramatic downturn, going into a weekend does that give you cause for concern for soybeans moving forward? Gold: Not really. We've been up a buck a bushel roughly after the rally on Wednesday night. We gave them back 20 cents of it. Okay, the markets need to correct. I don't see anything fundamentally wrong. I see some positives. Again, the funds are heavily short beans. They're short an awful lot of meal and oil. So, that could be positive. What I see is the crush going through the roof and the estimates for the next couple of years is a huge increase in the crush. I believe the USDA is going to have to up the crush number on the supply and demand reports coming up in the next month or two. And I think they could be as much as 50 million bushels out from where the numbers should be, which could take the carryout from 315 down to 265. The other thing is we don't have all the Argentinean crop in yet. The Brazilian crop, the USDA says 155. I say, nonsense. I don't think you can have so many Brazilian people boots on the ground right there coming up with estimates from 140 to 148, 149, in that range, some even lower than that, and expect that the 155 is going to hold. I don't know why they aren't being more aggressive on that. They generally would usually start this month, we didn't see it. Hopefully in the reports coming ahead they're going to get that into line. So, I think there's a couple of bullish things out there, plus the funds being short, that could maintain the rally. So, this 20-cent break doesn't bother me all that much.

Yeager: But are you saying that the window on any bean news is shrinking? We're only down to a couple more stories that could happen to influence this? Is that what you're saying?

Gold: Well, we'll get into planting season, we'll get the acreage numbers --

Yeager: Yeah, before we get to that.

Gold: We'll get the acreage numbers, we'll see the stocks numbers. I think corn stocks are going to be a pretty big number. I don't want to venture any particular guess. But I think the American farmers is still holding a lot of corn. They have sold some on these rallies, but not a lot.

Yeager: Before we move to livestock, do you see acres changing dramatically next week, corn or beans?

Gold: I think the corn will be up from 91 million to 92, 93. I think the beans, some people are saying it's going to be bigger, I don't see that. I think we're going to lose some acres into cotton. And I just think that farmers are going to plant more corn that beans.

Yeager: Cattle on feed came just before you arrived.

Gold: It sure did.

Yeager: There was one number, placements, absolutely highest number since the series began in 1996. Placements were up 10%. What does that tell you?

Gold: Well, it tells me that, you know, Friday's lower prices in the feeder cattle market down $4 to $5, I hate to be the conspiracy buff out here, but people don't sell that kind of quantity if they don't know something. So, was this report leaked somehow? I hate to think so. But, boy it sure seems coincidental. At any rate, I think the report, we broke $4 or $5, there's probably a little bit more on that kind of a number. But the cattle market is still tight and futures haven't been responding to the cash market. There's still plenty of demand despite the economy. So, I think if we were down hard on Monday or Tuesday that might be a good buying opportunity again.

Yeager: In feeders?

Gold: In the feeders.

Yeager: What about in cattle? You talk about demand. I guess it's kind of what I said at the beginning of the show, have we just acquest to this is the high price?

Gold: Well, certainly the boxed beef price has gone through the roof out here. And the futures, they responded on Thursday, we were up $2, $3 around the country. We don't have a lot of cattle out there. The on-feed numbers aren't huge. So, there's been this disconnect between the futures prices and the cash price. The cash market keeps telling us that there aren't cattle out there. And there's plenty of speculators out there willing to sell rallies in the cattle market. What would I be doing? I made the recommendation over the last week, when you're at these kind of high levels, not buying a put seems to be an opportunity missed out here. We went up in the April cattle, filled the gap at $190.27 to the penny, we've backed off since then, haven't been able to approach back. So, until we close over that $190.27 in the April, I think you've got to be a little careful out here.

Yeager: I know not every soybean crushed goes to feed hogs, but some does. Does that have any correlation to you in what is happening in hogs right now?

Gold: Well, the hog market, you look at the bad months in hogs, we were at contract highs earlier in the week, we have since broken $4 or $5 off of that. But, in general, I think that we're going to be feeding a lot in hogs. Ethanol demand is going to keep growing, in my opinion. I think when it's all said and done, electric vehicles are not going to be the thing that a lot of people think they are. And I just bought a new car and it's gas and I'm happy it's gas. So, more directly to your question, I don't know how much that -- but the cheaper corn prices, they're going to feed it, no question about it.

Yeager: Do you see -- hogs have had this rebound of sorts and then sell off, it's like up one week dramatic. That is about one of the only things that has had dramatic moves lately. Do you anticipate that continuing?

Gold: Well, the hogs can be a very volatile market. Going back to the old billing market, that was the crapshoot in its day, but the hog market has been equally volatile. And the spreads, when you had such low prices on the winter hogs and the higher prices in the back and then the back months leading the way higher out here, that volatility I think in the spreads is going to continue.

Yeager: In the dollar as well, we've moved almost 200 ticks in two weeks higher, not usually good for exports in the United States.

Gold: We had the break earlier in the week and then we came storming back. I think the last I looked it was 50 ticks well over $104 again and that's never a good sign for the grain market or the export market. We need to see that dollar back under par, which is $100, and that might stimulate some buying.

Yeager: All right, Mark, appreciate your time and insight. Thank you so much.

Gold: Always nice to be here. Thank you.

Yeager: Good to see you. Mark Gold, everybody. We're going to pause our analysis and continue our discussion about these markets in our Market Plus segment. You can find both analysis and Plus on the website of markettomarket.org. We are so close to our goal of 10,000 YouTube subscribers. Help us cross that threshold and you can stay current on new releases from us in our episodes, our MtoM podcast, as well as new stories. Hit subscribe at youtube.com/markettomarket. Next week, sorting two major government reports with a panel discussion. Thank you so much for watching. Have a great week.

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