Market Plus with Mark Gold

 

Paul Yeager

This is the Friday, January 6, 2023 installment of Market Plus. Joining us now is Mark Gold. Mark, it's a good thing they don't roll between the shows. I think we'd get ourselves both in trouble. One of the things, though, before we get started, you were commenting about the Colleen Krantz’ story about ducks. Yes. You've been having duck for you were excited about that story.

Mark Gold

You know, I took a quick look at it. I think they were talking about Maple Leaf Duck in Indiana. And I've been eating ducks since I was a kid. My mother would bake it in the oven, take the pot, pan out with me. We pour the grease, I'll put it back in. And it was hours of just draining the grease off.

Mark Gold

But their product, it's prepackaged. It's great. I love their duck. Lorraine's giving them a great boost here, but it's a great it cooks in 20 minutes on the stove at 375, and it's fabulous.

Paul Yeager

So now you're going to have duck tonight for supper?

Mark Gold

I would I would love to have it. If I was in town. I would have it sitting in my refrigerator right now, my right hand to God.

Paul Yeager

It's there's some that call this January report, the Indianapolis 500, the Super Bowl, the Kentucky Derby all together. It may have lost a little bit of its luster as USDA has maybe made some adjustments throughout the year. It's not as big of a surprise. What stock do you put in it next week that it's going to be a market moving report?

Mark Gold

Well, this report has a tendency to do just that, increase the volatility, get some big movement out there. There's usually some surprise. And I'm not going to be foolish enough to guess which way it's going to be. But I would have to say, looking at the demand on corn and wheat, they should be decreasing the carry, increasing the carry outs.

Mark Gold

So and lowering export expectations on the beans. It's a little tougher. Are they going to start cutting it now with what's happening in Argentina with the hot, dry weather? They're probably not. Demand's been okay on the beans, but we're looking at a huge Brazilian crop. The question will become, what are they going to do with Chinese demand? And I still think Chinese demand is going to be under what we're used to in the soybean market.

Paul Yeager

Well, we have great questions that came in via Twitter and Facebook. And we're gonna start with Ty in Iowa. And Ty is one of those that produces nontraditional meats. He says, how long can this or how low can this corn market go? He's looking for a good time to buy corn for feed.

Mark Gold

Well, I wouldn't be in a rush. Let's start there. To buy. To buy it. How low can it go come July if we've got good weather and the lack of demand that we're seeing here? You know, we can be at $4.50 corn at some point on a good break. 50 sounds from where we're at now when I start buying some call options.

Mark Gold

Sure. Because things can change in a hurry, as we all know. But I'm bearish corn I’m bearish the wheat neutral the bearish on the beans. If Brazil gets any rains. Excuse me, Argentina gets the rains. Look out below.

Paul Yeager

Well, you mentioned in the analysis segment how if we get rains and we have received rains and if we grow a good corn crop, what happens if the United States, the American farmer grows a great corn crop this year on top of a good Brazil crop?

Mark Gold

It's going to be a tough time for the American farmer. And what I've been kind of railing about the last couple of weeks is, look, guys, you've got grain in the bean. Why we had that discussion in the regular segment. There's no carry to the market basis is great sell it we don't know where the call option is.

Mark Gold

So think there's higher prices out there. As far as new crop, we're going to plant as many acres of corn and beans as we possibly can. If we get a great crop, we can see these markets move substantially lower. How many farmers over the last four or five years have gotten very comfortable with 0 to 1% interest rates?

Mark Gold

Now, they weren't getting those rates. They were paying two on three, but now they're paying eight, nine. Now what's going to happen when they add those costs in markets starts to go down. They have a big crop high inputs, whether it's seed, fertilizer or whatever it is. They could get jammed and jammed hard.

Paul Yeager

So the higher interest rates was the first warning shot, the drop, the dramatic drop that we could see in commodities is number two. Is there a third shoe to drop?

Mark Gold

You know, China recession here, a recession in China. And China certainly looks like it's in it right now. People say here in the U.S. you don't know a recession until you look at your own checkbook. I think there's some truth to that right now. The the Americans have gone on a spending spree in the last couple of years with cheap interest rates.

Mark Gold

Nothing to do except watch QVC and spend money. And now they're going to have interest rates. And this credit card debt is astronomical. What are they going to do when there's all of a sudden paying 15, 16% on these credit cards? Can that lead to a recession? I don't see anything really positive out here. I think the Fed has got things really messed us again.

Paul Yeager

It's a family show.

Mark Gold

It's really messed up. I don't believe much of what the Fed tells us, and I think the evidence will eventually be and what happens long term with interest rates. And I think they're going higher.

Paul Yeager

Well, the Fed has long said they've looked at that, the jobs data and the jolts and then the unemployment and the the jobs created that we saw released today. Given that there are still a whole bunch of openings, is that going to give fuel to the Fed to keep going higher or some of these other thing, the things that you're talking about going to hold us?

Mark Gold

You know, I don't see these unemployment number, these employment numbers as being that great compared to other historical times. And I look at all these jobs that are open. People can't get the people to fill the jobs. I just see that, you know, a whole lot of chains coming together and linking themselves up, which doesn't look good to me from the economy standpoint.

Paul Yeager

Let's go back to the grains for a minute. We don't get a chance to our cotton on the show, but you see cotton as a player soon when it comes to acres is the rally that we've seen here lately in cotton tied to buying acres or something else?

Mark Gold

Yeah, we were up fairly decent for the week. We're up around 85 cent cotton and I still think we've got to move it substantially higher to draw acres away from corn and beans with $6 new crop beans and $13 almost $14 new crop beans, farmers are going to try to plant as much corn and beans as they can. So I think Cotton's got to stay pretty firm, move a little bit higher to try to attract some some acres.

Paul Yeager

Let's get back to questions. Phil in Ontario wants to know a little bit. And there's a certain part of this question I want you to focus on. He says, Are we reaching a tipping point for grain prices based on the last few weeks of the specter of the big Brazil crops? But what I want you to focus is on spec selling.

Paul Yeager

You said something very dramatic on the program about some selling that's coming soon.

Mark Gold

Yeah, the funds rebalancing, they'll start on this Monday and it looks like they want to sell feeder cattle, fed cattle, hogs, corn, wheat, beans. And that traditionally, if you look at what they traditionally do to rebalance is sell what's high and buy what's low. So good the funds come in and start buying cotton and selling beans against it.

Mark Gold

It's possible now if we come in Sunday night and it's still hot and dry Brazil beans will open up another ten or 20 here, would I be looking to sell a new crop if that happens? I we've been laying in some very small sales and we would probably get a little bit more aggressive on Monday if that happens.

Paul Yeager

Okay. Gary, we did cover your question about basis and a couple of times, so thank you again for your question. But let's go to Paul in Wisconsin. You've touched on this a little bit. He's asking, with interest rates higher, will more grain be moved off the farm sooner rather than later? Many people have sat there in the last few weeks saying store and store and ignore is behind us.

Mark Gold

And I agree with.

Paul Yeager

You’re with that.

Mark Gold

I’m with that, first of all, there's no carry in the market. There's no compelling reason to store grain except that you're hoping for higher prices. As I always say, if you have a handful, I hope, and a handful of cow manure, you know what you got a handful of cow maneure or so quit hoping with this grain. And I think that the the higher interest rates guys are going to have loans to pay off.

Mark Gold

They're going to want to pay down debt as much as they can. Why do you have this corn and beans in the bin? And it just boggles my mind. You know, I look at it from a businessman's standpoint and kind of try to look at the cost analysis. And to me, it just doesn't pay to store the grain.

Mark Gold

There's there's no carry. The market is telling you what to do and the market is telling you to sell it and sell it now. And if you're still bent on higher prices out there, then I think you've got to look at buying a call option to keep the upside open there. They're actually not that bad price wise. So, you know, spend 20, $0.30, buy a call, sell the grain.

Mark Gold

The basis is more than paying for your your option.

Paul Yeager

Last thing and it comes maybe as we listening to you I'm going to I'm thinking goodness gravy. We got a lot of alternative things we maybe need to think about. Scott in Iowa wants to know, Mark, how does the niche be like grass fed versus for what packers in the captive market compare on returns to producers?

Mark Gold

My guess is, and I'm not an expert on this, but with the lower cost of grain in the higher premium at the supermarket to sell the product, people want, some people want grass fed beef. Personally, I hate to tell this gentleman, but I don't. I'm not crazy about it. I like corn fed beef. You know, that's what I was raised on.

Mark Gold

That's what I enjoy and that's what I prefer eating. But I think as far as their cost structure goes, if you've got the ability to put them on grass and keep them there and you want to make some money with it, I think it's a reasonable alternative. And try to avoid some of the mess that you've got in the cattle market when it comes to delivery and basis and those things.

Paul Yeager

We did say we were to talk a little bit more about hogs and that was tied to China. It was an eight and a half percent move lower this week. Again, when it comes to China, how long do we have to look to them for signals? I mean, if this COVID turns out to be terrible for the first quarter of 23, is that how long we're looking at?

Mark Gold

I would say yes, with the caveat being, what's Vietnam going to do? What are the Philippines going to do? What's Colombia going to do? There are some other countries out there looking for American pork that can offset some of the slack of Chinese demand. So can we take a hit between now and April? Yeah, maybe we can. What if we get hogs?

Mark Gold

Cheap to me, cheap hogs or $60 hogs? Long one would I’d be trying to establish some kind of long position with call options? I would.

Paul Yeager

And maybe that job will be that important come Monday for some of those funds.

Mark Gold

Maybe.

Paul Yeager

Possibly. All right, Mark, good to see you. Happy New Year.

Mark Gold

Happy New Year.

Paul Yeager

Year. I'm glad you're able to tell us something positive. Yeah, I think there was something positive. Yeah. Yeah.

Mark Gold

You know, the beans could open higher on Monday.

Paul Yeager

We'll take that. All right. Thanks, Mark.

Mark Gold

Thank you.

Paul Yeager

All right. That's going to do it for Market Plus. Next week, we are going to look at the impact of that big report that we mentioned. We're going to have two analysts in here, Naomi Blohm and Matthew Bennett will be at the table. We'll see you next week for that deep dove. Thank you for joining us this week. Have a great week. Bye bye.

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