Market Analysis with Mark Gold

Growing global tensions weren’t enough to push the trade out of neutral. For the week, the nearby wheat contract lost a penny and the March corn contract added 7 cents. The trade keeps walking the support line as big South American crops get bigger and exports of U.S. piles stay in demand. The January soybean contract was up 4 cents while January meal dropped $4.50 per ton. March cotton contracted $1.83 per hundredweight. Over in the dairy parlor, January Class Three milk futures added $1.14. The livestock market was mixed. February cattle fell $2.45. January feeders cut $3.65. And the February lean hog contract gained $1. In the currency markets, the US dollar index went up 35 ticks. January crude oil weakened 83 cents per barrel. COMEX gold gave back $24.20 per ounce. And the Goldman Sachs Commodity Index lost more than 6 points to settle at 531 even.

[Yeager] Joining us now is one of our regular Market Analysts Mark Gold. Hello, sir.

[Gold] How are you? Nice to be back.

[Yeager] Good to see you.

[Gold] Good to see you.

[Yeager] But you wrote this week that it wasn't good in many parts of the world. We have global tensions. We have South Korea, Russia, Ukraine, the United States, France. A lot of those things, the wheat market usually is what benefits or loses because of it. Did that happen this week?

[Gold] We made a new contract low during the day one day, came back and closed higher on the day, so they kind of discounted all of that. The dollar has been the real limiter to the wheat market. We're back to $106. We closed under the support on the dollar yesterday at $105.80, we closed under that. We were 40 ticks lower early this morning. Unemployment came out and then the dollar got strong again. So, we're just in this sell the rallies, buy the break kind of mode. It's the professionals that are selling the rallies. It's the end users that are buying the breaks. And until something really moves this market some news, we're going to stay choppy here for a while.

[Yeager] We'll ask about seasonality and maybe a December bounce early, it doesn't usually impact wheat as much as it does the other two. But with wheat in this country, with weather always kind of a question mark and we already know Russia's crop isn't as big, any hope for U.S. wheat producers?

[Gold] I'm surprised the wheat didn't act better this week. The Russians came out and said that 37% of their wheat crop is either sprouted or is in poor condition. That is the worst it has ever been. You'd think that would rally the wheat market. It didn't. So, we can't really rally on good news, we don't break on bad news really, we just kind of hang in there. But all three corn, wheat and beans, if you look at the charts, they're all trying to make a low and make a bottom in here but we're just hanging above it. So, I think that's telling us they're going to wait and see what the President-elect does, they're going to wait to see what the WASDE report says on Tuesday. Hopefully they're going to cut the carryouts by raising the demand in ethanol and in exports.

[Yeager] Yeah, in corn the ethanol has been strong. Corn has been hanging around and is on the north side of that resistance line. What else is keeping it up there?

[Gold] Well, the exports have been so stellar considering we're waiting for the Brazilian crop to come in, in corn and beans. But in the meantime, corn closed at $4.40 today, it's the first time -- our other close was $4.40 and a quarter about a week and a half ago -- but it looks pretty good here. You've got resistance really every dime in the corn on the way up. But the corn has been the real stalwart among the three commodities. Hopefully that will help the meal, meal made a new contract low today, new contract low close, that doesn't look good on the charts.

[Yeager] I hate to ask this but I have to, do you sell at this point because of the fear that things could go lower because we've been so "strong"?

[Gold] Well, it's hard to say we're strong when we're near our lows out there.

[Yeager] I get that but we know how low things can go.

[Gold] I think the real risk is more likely in the bean market. If we start going tit for tat with China, it's not going to be good. Plus, when you look at what a great partner Mexico has been to the grain markets, you look at the daily or the weekly numbers it's China and Mexico, China and Mexico. And Lord knows if we lose that support the beans could take a pretty good drop here. So, the beans maybe not, the corn I think is going to probably hang in there. But the beans I don't see that. We need something positive in this bean market because we've got this huge Brazilian crop right on our heels.

[Yeager] Given that effect, we have a question I'll ask in Market Plus about the potential for South America, but let's talk about the potential for China. You and I have talked for years, as has everybody who sits there, about we need China back, we don't need China back. Let's just say China's not coming back for the foreseeable future. What do I do if I have grain sitting in a bin or I want to plant some acres next spring with that scenario possibly out there?

[Gold] You plant more corn, you plant more cotton, you do something else because why add to a bad situation? It's going to take a while. And just on normal terms supply and demand will work its way out. But weather is going to be a big part in any growing season. We came close last year to really doing some damage. We got those late rains. That saved the crop. But maybe next year we don't get those rains. You just have to wait and see how these things develop. And right now, the big development is Brazil got the rains, they're going to have a huge crop and that is going to be tough to compete with, plus the real is at lows that we haven’t seen in a while.

[Yeager] Right, and that was part of the story. Should we be paying attention more to what is happening in Brazil than China right now?

[Gold] Well, China hasn't been a great partner in the last year or two. We don't want to lose them. But if we lost them, at this point what are we losing? Certainly, in terms of the bean market. It helps but we've been picking up other business. South Korea, Vietnam, even Egypt is buying some beans, we've seen some other people come into the market, Columbia. So, we're getting by without China, but we don't want to lose them. Gosh, if we could just get some of that back it would be great.

[Yeager] Well, India has become a buyer on some commodities and usually if one goes here there will be a shuffle around the globe that we can hope. All right, of wheat, corn, beans, are you making sales in anything? Or are you riding them all?

[Gold] Well, in the corn market you have to be selling. If you've got old crop in the bin, what are you waiting for? You've got a strong basis in most parts of the country, really good basis, the carry in the market doesn't pay. Sell the corn but Lord knows we're on a cusp of maybe something good happening. You've got to own a call option to keep the upside open. But why are you paying commercial storage? Why are you sticking this corn in the bin when you've got this good basis, you've got $4.40 corn out here? Do something with it. So, I don't want to be hanging around with corn in the bin. On the beans, you've got to be selling it or at least have a put underneath you because there is still a fair amount of risk out there. The wheat market I think is trying to hold its own in here. But if we see the wheat start closing under $4.70, excuse me, $5.70, now you've got a problem. You don't want to see that.

[Yeager] I'm going to ask, Paul has been asking this question for a couple of weeks. We distilled it down to this. Will we have better policy or better prices in the next four years?

[Gold] Well, policy is going to be tough because if the President-elect does what he says he's going to do it's going to be tough on the American farmer and the American farmer during the first term was willing to pay that price because that's their man and that's who they wanted. They've got him again and now they're going to maybe have to pay the piper. I can continue to believe there are better ways to deal with China than just tariffs. And I think the easy thing to do, as I've said before, is send all these Chinese nationals back home that are in our university systems. Why are we teaching them to compete against us? So, you want to hurt them? Send them back to China.

[Yeager] Well, let's pivot a little bit to livestock if we could because that looks like we've sent the highs packing. Do you think in live cattle that is the case?

[Gold] You know, this boxed beef just keeps coming back at you. Today it was up $4, back up to $308 and change. There's good demand for the beef out here. Now, every time we seem to get to the cattle at $190 and the feeders to $260, we seem to have trouble getting over those levels. I'm hopeful that we can come back and stay strong. The cash market doesn't back off. Packers have been having to raise their bids up to $290. The offers are out there at $292 to $294 today. I haven't seen any late trades yet. But they should be higher at maybe $191 and a half, maybe $192. So, you would expect this thing to kind of fall apart out here. But not as long as the demand for beef is good and as long as the economy stays good, I think that stays up here.

[Yeager] In the feeder market that did take a little bit of a tougher first part of the week. But that also looks like it could be trending south. Is the high in there?

[Gold] Maybe. And if it is it's because guys are starting to look at better pasture conditions out there and more cattle, more feeder cattle will be out there. So, maybe that is shifting a little bit here. But I like the cattle market. I just wish you could get over some of these resistance humps and really bust out of this thing.

[Yeager] But we've busted pretty high. This is crazy territory where we've been for months.

[Gold] And, you know, generally you don't have a top that lasts months. You usually make a top come back down. We're sitting here and we're fighting to stay up here. And so, it tells me maybe we haven't seen the highs quite yet.

[Yeager] In hogs, we continue to have good demand for that as well.

[Gold] Yeah, and we're going to see more trade deals. Vietnam, it looks like we've got a deal with Vietnam. They love the pork. The Chinese love the pork. Exports have been good in the pork. So, we're at pretty good prices up here. The hogs are $100 plus. Can they go higher? Sure, why not? But when you're at $100 hogs do you want to have a $90 put to protect the downside just in case six months out? Yeah, why not? But I think we could see some higher prices out here.

[Yeager] Let's spend the final few seconds on the dollar. You kind of mentioned it a little bit, our competition with the real, the global news about it. What is the future of this dollar? Are we headed higher or lower in the next we'll just say six months? I'm going to give you a little time.

[Gold] You know, again, it's one of these commodities every time it looks like it's going to do something to break it comes right back. It did it again today. I think as long as the President-elect continues on his economic policies it's a strong dollar policy. And what he's doing with the Chinese telling them, listen, if you want to mess with the dollar, we're going to mess with you in a big way, adds that strength to the dollar. So, I see the support around $103, I see the resistance around $107, $108 and I think we'll stay in that bend for the next six months.

[Yeager] And we're going to stay here together and do Market Plus in a little bit. Thanks, Mark, good to see you.

[Gold] Good to see you. Happy Holidays to all of our listeners out there. Merry Christmas.

[Yeager] All right, appreciate it. Mark Gold everyone.

[Gold] 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 our website of markettomarket.org. We have a perfect holiday gift for yourself, an email from Market to Market. Each Monday, the Market Insider newsletter is sent out with behind-the-scenes information on this program, how we put stories together and exclusive details about our 50th season celebrations. Sign up now at markettomarket.org. Next week, we go back in time to explore the early days of this program. Thank you so much for watching. Have a great week.

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