Market Analysis with Mark Gold

Paul Yeager:

A stronger dollar and improved moisture conditions along with technical and fund selling, dominated the trading headlines in this holiday shortened week. For the week, the nearby wheat contract lost $0.49, while the March corn contract sold off $0.25. Brazil's pending crop and political changes influence the soy complex, along with concerns on the health of the Chinese economy. The March soybean contract shed $0.32, while the March meal contract moved higher by $6.60.

Paul Yeager:

March cotton improved $2.30 per hundredweight. Over in the dairy parlor. February Class three milk futures gained $0.08. The livestock market was lower, with February cattle down $1.12. March feeders cut $0.58. And the February lean hog contract shed $7.42 or nearly 9%. In the currency markets, the US dollar index added 44 ticks. February crude oil plummeted $6.50per barrel, COMEX gold strengthened at $51.90 per ounce and the Goldman Sachs commodity indexed finished more than 37 points lower at 572.85.

Paul Yeager:

Joining us now is regular market analyst Mr. Mark Gold.

Mark Gold: 

Nice to be here once again. Happy New Year.

Paul Yeager:

Happy New Year to you. Mark's appearance is not indicative of what the market had said. But Mark, let's just face it, it's a tough week in grains.

Mark Gold: 

Tough week in grains. You know, first of all, we had much better weather in the United States. All this arctic blast and this typhoon type weather hitting the West Coast is ultimately going to help a lot of things. All that moisture that moved across the Midwest, we're going to see these river levels come up, replenish a lot of soil moisture with the big exception being western Kansas.

Mark Gold: 

They are still dry and need a lot of moisture.

Paul Yeager:

And that leads us into the wheat market right off the bat. You talk about the missed opportunities of moisture there, but that domestic story is not the only one in wheat.

Mark Gold: 

Well, you've got Australia looking at it, maybe a record crop. It's going to be huge. You've got Russia selling wheat wherever they can sell it. You do have the concern of the ongoing war between Russia and Ukraine. I thought it was great that Zelensky told Putin to take his --

Paul Yeager:

It’s a family show, remember?

Mark Gold: 

Yeah -- take the cease fire and stick it in the barrel of his gun. So that's an ongoing situation that could get bad very quickly depending on what Putin does.

Paul Yeager:

And it has and it has been a very serious situation for a long time. But when you say Russia's finding anywhere they can sell that has influenced the world market.

Mark Gold: 

No question about it. We've got relatively cheap wheat out there. These current rains and moisture and the snow cover we've had in the U.S. has knocked out the threat of winter kill teally. And again, with the exception of western Kansas, we're going to have some pretty good wheat in this country.

Paul Yeager:

We're down 6% on the March contract, July down 6%. What's a range? Do we have more lower to go.

Mark Gold: 

In the wheat market? Yes, absolutely. You know, you look at the wheat, the high in 12 and a half, $13 range back down to $7.50. That's one heck of a break in this market and it doesn't mean it can't go even lower. Look at these export numbers. The they're almost non-existent, you know, 120,000 metric tons of wheat going out the door.

Mark Gold: 

It's nothing. The dollar on Friday put in a remarkable move, it was up a point, a full penny, and it was down more than a full penny, but still closed higher on the week. The dollar could be in some trouble here. That might help things long run, but we just don't have any export demand for our wheat. And it's killing our market.

Paul Yeager:

Not much better export story in corn either, though.

Mark Gold: 

No corn. We had the exports this morning, 360 or 350, whatever. It was just terrible numbers out here without China buying. Mexico's stepped up a little bit to the plate and kind of helped us a little bit here. But it's not what China could do. And if anybody wants to know China's in trouble with this COVID situation, just look at what's happening there.

Mark Gold: 

They've stopped announcing how many cases, how many deaths. They just increased their crude oil export quotas, which tells us that their economy is slowing down dramatically. So, you know, where's the demand going to come from if we've now China out of the box. Plus, the world's going to be bringing more and more grain to the table over the next couple of months.

Mark Gold: 

I just it's a tough market.

Paul Yeager:

I asked you about the wheat range. Same thing in corn. I'm not even asking you to say a top range because I'm going to bet you're going to tell me we're not going to see a top. Is there still more room to move lower on corn and by how much?

Mark Gold: 

Well, you know, two years ago we were at 450 corn and then last year, we never really broke too hard. We had the big rally first, then the break afterwards and then came back again. But, you know, can we see corn under $5 this year? We've got new crop sitting around 596. There's no reason why we can't go down and test five bucks in there if we have good crops and there's soil moisture replenishment that we've seen in the last two weeks is going to help.

Mark Gold: 

We haven't had a good growing season in three years. Really. If we ever have a good growing season, look what Brazil's doing with their beans. I mean, there's just no telling how big these yields will get. And, you know, the American farmers gotten kind of used to big yields and big prices or decent yields despite the rain. What's going to happen if we get rain, timely rains and always is a big concern.

Paul Yeager:

Let's go to the big picture then. You mentioned Brazil, their crops about two weeks from coming online. Argentina, though, about to get some rain and cooler temperatures.

Mark Gold: 

Well, the Argentinean weather shifts almost every 12 hours last night or yesterday morning. It looked like they were going to have rains, maybe Tuesday, Wednesday. They take in the high 104 numbers out of it, down to like 100 degrees. Now, last by the end of the day they put rain in Tuesday, Wednesday, Thursday, Friday, Saturday, Sunday. And which was part of the pressure we saw yesterday.

Mark Gold: 

And then all of a sudden we wake up this morning and it's gone. Maybe two chances of rain, maybe Wednesday, Thursday, temps back up to 100 degrees. So I think that's what rallied the beans on Friday. But in my opinion, when we get these kind of Argentinean rallies, don't worry about it. Brazil's going to have more than enough.

Paul Yeager:

So what do I do?

Mark Gold: 

What do you do is you take advantage of these rallies. First of all, in corn and beans, if you've got old crop in the bin, you really have to ask yourself why. The basis has been incredible. All around the country. You've got virtually global -- $6.50. $7 corn, depending on the basis where you're at even higher in some areas, you've got $15 beans plus a good basis.

Mark Gold: 

There's no carry in the market. Why are you storing these grains when the market is begging you for it? Paying you for it? Why? Why are you sitting there? Are you hoping for higher prices? Well, good luck. Maybe you'll get them. But you can always sell the grain and buy a call to keep the upside open.

Paul Yeager:

That ship has sailed. So, Gary in Wisconsin, we kind of glossed over your question, but that was the basis question. Maybe we'll ask it for sure in Plus. I need to get to livestock because I just the outside perspective, you would think with lower grains that maybe cattle for sure feeders would have a better week than they did either.

Paul Yeager:

Why did cattle not do so well?

Mark Gold: 

You know, it's an interesting question because the box beef market has been so strong. We backed off a little bit here in the last day or two, but we're still at 282 or we were this morning. We've had obviously a strong cash market in the retail level, but the Packers haven't been willing to pay up even though there aren't that many cattle around.

Mark Gold: 

So why would the market break? I think it's a couple of things. Number one, this is a long time ago, but when I was back in college in the mid seventies, I did a study for one of the professors about cattle relationships and how many times we would make highs in the cattle market in the third or fourth Friday of the year.

Mark Gold: 

And that's always stuck in the back of my mind. And when we were on the contract highs last Thursday and Friday, I'm thinking, I don't know if it's going up or down or not, but I do know this is a great opportunity to buy some puts here. So I think that's part of the technical scene that's going on.

Mark Gold: 

And right now, if the last couple of days certainly looks a little toppy. The other thing I think that's going on is that, you know, even though the Dow is strong, I think people are concerned about world economies. We're going to have we know it's tough to pull cattle now and that the placement numbers are going to be tough for a while.

Mark Gold: 

But if we sometimes it's a futures market, we build these things in ahead of time and maybe we've built enough in for the time being.

Paul Yeager:

On the on the cattle.

Mark Gold: 

On the cattle side.

Paul Yeager:

What do you think on the feeder side, then?

Mark Gold: 

Well, I think feeders are going to be as much a function of the corn market as anything else. But I think cattle, hogs and fat cattle, feeder cattle and hogs all have a propensity, in my opinion, to go down because the fund rebalancing is going to start on Monday and we expect the funds to be selling corn, wheat, beans, cattle, hogs and feeder cattle.

Mark Gold: 

So I don't think that's a positive for these markets.

Paul Yeager:

We've already had major funds selling this week. You're saying we're due for more come Monday.

Mark Gold: 

It's a rebalancing, so it's certainly possible we could see it. And generally it comes in toward the end of the day, we could see significantly the funds are long, 140,000 corn. They're long 100,000 beans, and 100,000 meal. Could we see more selling? You bet we could.

Paul Yeager:

So maybe part of the pause for some on the livestock side have been we're thinking it's going lower their feed side.

Mark Gold: 

Well, I think that's part of it. But to me, the technical indicators and with the fund rebalancing and the fact that the market just didn't act that good this week with the boxed beef up at 288 or 289 earlier, with the cash prices not really responding too much, maybe up a buck in Iowa, that was it.

Mark Gold: 

You know, so I think you got to be very leery here.

Paul Yeager:

What about hogs? I mean, that wasn't a good week either.

Mark Gold: 

You know, China, I think you watch China to see what the hogs are going to do. Any time there's more concern about the COVID situation in China, hogs are going to go down.

Paul Yeager:

And that's that's something I asked many times that about, but not everybody agrees with you on that. So again, continue to watch China is what you're saying.

Mark Gold: 

I can't believe they don't all agree with me.

Paul Yeager:

Well, you know, wouldn't be the first time they agree with everything else. All right. I'll hold that and get the rest of your hog discussion in our Market Plus. All right. Thank you so much. That is going to do it. As we put a pause in this analysis, we will continue and talk about these markets in our market plus segment.

Paul Yeager:

So that's analysis and plus there you can find those segments on our website of markettomarket.org. All of these resources that we've mentioned here are free. We also post our video content to YouTube, which includes the show, the Plus and our stories along with the MtoM Show podcast. Make a resolution to try something new and join our family by subscribing to the feed of market to market.

Paul Yeager:

Next week we look at the impact of one of the biggest government reports of the year. Thank you so much for watching and have a great week.

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