Market Analysis with Mark Gold

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Paul Yeager: An eye on the size of crops in South America and demand for product kept pressure on the trade. For the week, the nearby wheat contract lost $0.12 while March corn lost $0.11. There was a sell off in the soy complex as widespread rain fell in Brazil. The March contract declined $0.42 and March meals shed $16.60 per ton. March cotton shrank by $0.81 per 100 weight.

Paul Yeager: Over in the dairy parlor- February Class three milk futures fell $0.16. The livestock market was higher. February cattle added $2.08. March feeders improved $1.05 and the February lean hog contract gained $2.02. In the currency markets, the US dollar index increased 100 ticks. February crude oil expanded $2.50 per barrel. COMEX gold lost $20.40 per ounce and the Goldman Sachs Commodity Index added more than a point to settle at $537.90. Joining us now is regular market analyst Mark Gold. Happy New Year, Mark.

Mark Gold: Happy New Year. Nice to be here.

Paul Yeager: Beat you to what you're going to tell me first. Sorry. I wanted to be ahead of you once. I never entered this wheat market. When we look at the differences, it's always a different aspect. We look at lower Kansas City, we look the side to side in Chicago. Then there's Minneapolis. Which of those is, do you think, the biggest influence on the wheat market as a whole right now?

Mark Gold: Well, I think Chicago generally is unless there is a major weather issue somewhere. We have seen, you know, Minneapolis go way above either Chicago or Kansas City in one particular year. But in general, Chicago is really the main market. It's the main market because that's where the funds play the biggest game. And that's going to be the biggest market mover are generally going to be the funds.

Mark Gold: So any of those other markets, either Kansas City or Minneapolis, can certainly have their day in the light. But for the most part, it's going to be most people tend to follow Chicago.

Paul Yeager: And we look, though, let's talk about Kansas City for a minute. In wheat country where winter wheat is growing and rain is falling domestically, the story is there's moisture in the plains. Is that the biggest weight on the market right now?

Mark Gold: Well, they've had some much better weather than they've had, but we keep getting these ten and 15 cent rallies during the day and we had a pretty good close despite the poor closing the corn in the beans. So it's kind of on its own thing here. Maybe the wheat is worried about this cold snap that's going to come down and maybe there's not enough snow cover.

Mark Gold: So I'm guessing that's what it is. But the conditions on both Oklahoma and Kansas City wheat for the month improved dramatically. And I think that's certainly a result of the rain.

Paul Yeager: But the big question is, who wants it? Well.

Mark Gold: Certainly none of our typical export partners. I mean, the exports this morning were just terrible. The dollar is still too strong. So, you know, unless we see the dollar really take out 100 points, then I think we might see a little bit of pickup in business. But the Chinese aren't buying it. It's it's not buying it. The Russians still have plenty of wheat.

Mark Gold: Ukraine is still doing a good job for them of getting whatever grain they have out. So, you know, like you said, who wants it? We really don't have a lot of people. There's a good domestic usage, but the export markets a dog.

Paul Yeager: So traditionally when there's no news or anything moving a market, it's going to fall lower. So if I'm somebody sitting there wanting to make a position, make a sale, what am I looking at here?

Mark Gold: Well, in the wheat market, I wouldn't be in a big rush. The wheat is certainly held up best this first week of the year. And, you know, when you can't figure out when we had all this moisture and some negative news in the wheat and it opened, I don't know, seven or eight lower and came back and closed ten or 12 higher.

Mark Gold: That's pretty impressive. And then following it up with another. Okay. Closed today, That's impressive in its own right. And I think what it is, is the funds coming into the week were short about 80, 85,000 contracts. So wheat, I think they've been pretty good buyers. There's been talk about rebalancing the funds after the first of the year. I don't see it doing it in corn right now, but I do see it in the wheat.

Mark Gold: So maybe that's why wheat staying as strong as it is.

Paul Yeager: So you're trying to tell me that corn is weak right now?

Mark Gold: Well, I've been telling people in my newsletter that don't expect the corn to rally till we get the corn out of the farmer's hands the majority of the the corn out of the farmer's hands into the commercial hands. If you look at the positions that the American farmer has, you look at the very, very small short position, the commercials have.

Mark Gold: It's telling you the American farmer is holding on to a lot of corn. As I've said many, many times, a market the corn market will not rally until the corn is out of the farmer hands. Once it's out of the farmer hands. Now we've got a chance to rally the market. And farmers always say, Gee, how come the corn never rallies when we own the grain?

Mark Gold: It's because you own the grain and you know, nobody wants to sell a break in this kind of market. And if you're going to sell it and get it out of your hands, make sure you look at buying a call option sometime in the next couple of weeks. I don't want somebody coming back to me six months from now saying, oh, you told us to sell the corn to get out of it. I'm also telling you to buy the call option to keep the upside open, because once it's out of your hands, then the market will run.

Paul Yeager: What is the timeline that we need to see the selling happen to make something move?

Mark Gold: Well, you would think after the first of the year for tax purposes, guys generally wait till after the first of the year. Now we're starting to see some small farmers sales, which is pushing the market down a little bit. The funds are short somewhere between 180, 190,000 contracts of corn. What are they going to rebalance? I would I would if I was one of the funds, I wouldn't rebalance till I saw at least 50% out of farmer hands.

Paul Yeager: But Mark, the cost of what's on the board right now is not profitable for me. Why should I sell if I'm just going to lose money?

Mark Gold: Well, if you want the market to go higher than sell it. If you don't want it to go higher, just keep it in the bin and wait. But markets do things for for realistic reasons. And once we can change ownership from the farmer to the commercial, now we have a chance for me for the market to rally.

Paul Yeager: Okay, so there's that side of that story. What's the other story of the the fundamental issue of South America and whether and China will or will not buy? I mean, is that the weather is not dependent on farmers selling, but China coming in to buy might be.

Mark Gold: Well, certainly we've seen the exports being a pretty good disappointment out here. They've come in at times and bought some weekly numbers have been 1,000,000 million to in that range part of that's China a good part of that's been Mexico it's a very valuable trading partner we can't lose. So you know, is China going to buy more? I'm not so sure.

Mark Gold: They may they may be done with that for the time being. And with the rains that we've seen in Brazil, the second Serafina crop is going to be a big crop. They've been ratcheting it down just a little bit by the exports, but not significantly. And I think these rains will certainly help it. And we're going to see a big corn crop out of Brazil.

Paul Yeager: I heard from a viewer who has a relative or two in Brazil right now as we speak, saying they drove hundreds of miles yesterday in rain. Yeah, when the farmer is looking here in the United States to what's going on in South America and they see rain reports. What should they do with their corn specifically?

Mark Gold: Well, there's no carry in the market, maybe a dime carry in the market, maybe $0.12 carry in the market. Certainly doesn't pay the cost of storage. I have no idea why farmers have been storing this through since harvest. Makes no sense to me from a financial standpoint. They should have been selling it months ago and they should have been looking to buy some call options now if they haven't done anything yet.

Mark Gold: You hate to tell a farmer to sell grain on a break where a contract was by one farmer is selling on contract loss. No, but there is more downside risk in this market. I can just tell you this. If you need the money to pay the bank or the loans, whatever you're going to do where you own it with a call option, because that'll be the time where the market will rally.

Mark Gold: And again, I just don't see the market rallying until the farmer does that.

Paul Yeager: Is there any carryover to the soybean story then from corn.

Mark Gold: Carryover in terms of the carry outs coming out? Correct. You know, it's been the tightest of all of them. And certainly what gave the market a bit of a spook was this November and December. Weather in Brazil, hotter 105 degree heat, virtually no rain. And the market paid attention to that. But as the forecast started to change, the funds were long about 80, 90,000 contracts of beans.

Mark Gold: They started to get out of that. Now they're short after today, probably 40, 45,000 contracts of soybeans. So we've seen the funds liquidate. Their long positions get short. They're still long, about 45, 50,000 meal. I think once they're finally going to blow out in the rest of the meal, then I think it's probably time to buy some soybeans.

Paul Yeager: We had, I think, Tuesday, the lowest close in six months. What's to say we can't have another one of those in the next few days?

Mark Gold: Nothing that I see. The rains are still there. The beans everywhere except Mato Grosso will be benefited by these rains Mato Grosso, the big question there is and they're the biggest soybean producing state. How much damage was irreversible? And we don't know that. We won't know that until harvest. But there is a significant amount of beans in Mato Grosso that aren't going to make it with these rains.

Mark Gold: So now we play the guessing game. Is is Brazil going to produce a 158 crop or 153 crop? Kind of comes out next week. We'll get a better idea. But the rest of Brazil, well, Mato Grosso maybe continues continuing to lose yield. I think the rest of Brazil is starting to ratchet it up a little bit. You won't see that in this month's estimates, but you'll start to see it next month.

Paul Yeager: All right. Take the three markets that we just talked about, three commodities. And let's put this question to it. Matt in Iowa wants to know what market movers should we be looking for in 2024? Is it any different than what you have said?

Mark Gold: Well, certainly the remaining weather in Brazil, our spring weather and our summer weather, it's going to be the biggest mover. I think you've got to watch world problems out there. You've got the war in the Middle East. You've got the war between Russia and Ukraine. That doesn't seem to be letting up any time soon. Are they going to stop exports out of Ukraine if exports out of Ukraine stop and corn and wheat, then we can jump this market.

Mark Gold: If they continue to export, then they've got plenty of wheat. The Russians have got plenty of wheat. The Ukrainians have got corn to sell. So that'll keep a damper on it. But I think we need to watch the dollar, we need to watch the weather. We need to watch these world consequences and we need to watch what's going to happen with the politics here in our own country. You know.

Paul Yeager: It is an election year mark. It isn't always severe. Let's move to livestock. We had live cattle and all three that we follow higher this week. Start with live cattle. Why?

Mark Gold: Well, I think partly because of the storms that have moved into the plains. The box beef has just fallen out of bed. It went from 193, 194 down to 177, 178. But the cash markets stay relatively strong. We were looking at 174, maybe even 175 in Iowa this week, which is a bit of a surprise. The futures of now that we've got the Fed futures up front right in line with the cash market, maybe the cash is a little high relative to the futures.

Mark Gold: But, you know, you wonder how the futures are going to and the cash market's going to stay so strong with the banks backing off. But it hasn't been a good barometer of where prices are going to go.

Paul Yeager: Why is box dropping? Are we not wanting hamburger?

Mark Gold: Well, I think we're seeing cheap poultry. We're seeing cheap pork out there. And the American consumer is looking to save some money. And I'm guessing that's what it is. But we had the same situation a month ago when boxed beef was at 194. So it's hard to know.

Paul Yeager: Feeder wise, you mentioned the storm had a conversation with somebody in Oklahoma yesterday talking about, yes, there is cattle back in places where they weren't. There's feedlots starting to expand. Is there room for expansion? Is there capital to expand for some of these people?

Mark Gold: I would say so. The cattle guys have had some pretty good years out here. And I think if you we've got to see what the January 1st numbers look like. What's what's where and what I think when it's all said and done, we could expand the cattle business out here. There's room for it. In my opinion. We need to keep the demand going.

Mark Gold: It's tough being in the cattle market. You know, you look at these prices 225 on feeders and 174 on on fat cattle. Historically, these aren't cheap prices. So if we do start expanding, do you want to consider using some hedges by some puts to protect things that you're going to put in the feedlot? Let the market do its thing?

Mark Gold: I think it would be foolhardy to say that there wouldn't be some risk in the cattle market, if demand keeps winning the market. That looks good. Technically, as the hog market. We had a good week in the.

Paul Yeager: Hogs except for one day. Yeah, pretty rough day. But why did that thing rebound? And does it have legs to keep moving higher?

Mark Gold: We need to see something happen in China where we may pick up some demand there. I don't know why we had the sharp down the sharp up the next day, but suffice it to say from a technical standpoint, it looks a whole lot better this week than it's looked in quite some time. And maybe it's partly the demand that's picking up.

Mark Gold: We're starting to see that. So, you know, markets will find their own level and I think hopefully hogs have seen their bottom and we can see a bounce in here. Now.

Paul Yeager: Do we see the hogs benefiting from a demand domestically or a global demand for U.S. pork?

Mark Gold: I think domestically, you know, beef is high priced, as I've talked about. You know, prices of steaks in Chicago, When I go out to dinner, which is all too often, it's not uncommon to be $65 to $68 for a 12 ounce, 16 ounce prime steak. It's a lot of money. Most people having a little trouble getting that kind of dough.

Paul Yeager: Well, we are out of time. Mark, thank you for the insight. I see it a sophomore in 24 hour. Stay there for a minute there. Okay. Well, all right. So hold it on. And we're going to pause this analysis and continue our discussion about the markets and our Market Plus segment. You can find both the analysis and the Plus on our website of market to market dot org.

Paul Yeager: Let us help beat the winter doldrums with some podcast offerings each week. We have three that are release the Market Analysis. The Market Plus and the MTM Show search and follow in your preferred podcast player. Next week we'll look at two large government reports with some big insight in a panel format. Thank you for watching. Have a great week.

 

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