Market Analysis with Mark Gold

The weather, economic news and the Russians shooting missiles at Ukrainian ports pushed the market higher. For the week, the nearby wheat contract jumped 49 cents, while the September corn contract sky-rocketed 52 cents. Predictions of hot and dry weather along with the prospect of biofuel incentives in the Inflation Reduction Act bumped the nearby soybean contract 53 cents higher. September meal rose 43.10 per ton. December cotton added $5.85 per hundredweight. Over in the dairy parlor, September Class III milk futures added 26 cents. The livestock market was mixed. October cattle shed 77 cents. September feeders cut $2.93. And the October lean hog contract put on 90 cents. In the currency markets, the U.S. Dollar index fell 80 ticks. September crude oil gained $4.12. COMEX Gold improved $41.70 per ounce. And the Goldman Sachs Commodity Index improved nearly 28 points to finish at 693.15.     

Kohlsdorf: And joining us now to provide some insight on all of this is Mark Gold. Welcome back.

Gold: Nice to be here. Nice to see you.

Kohlsdorf: Yeah, nice to meet you, Mark. We'll start with some big economic news that has been putting some pressure on the markets. We had earlier in the show that the GDP fell for a second quarter in a row and a lot of economists believe that this is sort of the mark of the start of a recession. How is this weighing on the grain markets?

Gold: Well, we've had a pretty good rally despite all this bad news. We had interest rates go up, we had the GDP and the grain markets still had a pretty good rally. So it hasn't had much of an effect. Is it a recession people are asking? Yes, it's a recession. And they may come back and change these numbers. They're always famous for the next quarter revising the numbers. So maybe the point nine isn't a point nine, who knows. But this is what we're living with right now. It is what it is. But I haven't seen it so far take a big toll on the grain markets.

Kohlsdorf: Yeah, wheat really had a rally this past week. What has been the main driver with this? Is it the news that Ukraine could start exporting grain again?

Gold: Well, I think it has been a couple of things. If I was sitting in this chair a week ago when the grains were on their lows and everything looked pretty miserable, if I would have told you soybeans, November beans would rally $2 a bushel, corn and wheat 75 cents a bushel, people would have said I was crazy and rightfully so. But what happened? That's what happened. Now, the wheat rallied because no sooner than the Russians signed the agreement on Thursday at some point, they were firing missiles into Odessa. So is the agreement for real? Nobody knows. Now, we do know that there's at least three ships ready to move out of port over the weekend and there is a fairly long line waiting to come in too. Now, do the Russians fire on those ships? If they do, wheat will take off again in a big way next week. Putin knows how to play these markets as well as anybody and I think that is part of what is going on out here. It looks like maybe as we saw a big break on Friday from Friday's opening to Friday's close in the wheat that maybe things are going to open up a little bit. We know, somebody came out with a comment today that Crimea has exported 50 times the amount of wheat that they would normally export at this time which tells me that the Russians are selling stolen Ukrainian wheat and they're selling it out of Crimea. So there is wheat coming to the market and I think that is going to continue to be part of the story. But as we know, we harvest wheat somewhere every month around the world. And as those supplies come in, things I think will make it a little bit tougher for the wheat market to rally. But if there's a missile on a ship any time soon, wheat prices will react to that in a positive way.

Kohlsdorf: Everyone keeps calling it a fluid situation and it is. So there are also reports that the EU and Russia, their yields are much less than expected. Will that also be weighing on the market?

Gold: Well, I think the EU has certainly had some problems. France has been burning up, Germany and Spain have all had some problems. The Russian crop isn't that bad. They're looking at record exports. So I don't see that Russia is that big of a problem. But the question is, who is going to buy it? How are they going to pay for it? Are they going to pay for it in rubles? That has been probably one of the biggest surprises in this whole Russian deal is after the war hit and two or three days later the ruble is nearly worthless, now it is significantly higher than before the war and that is because Russia is demanding payment in rubles and people are chasing around for rubles. But the fact of the matter is, whether it's Russia, the EU, we'll still be harvesting wheat around the world. Sooner than we would think the South American crops will be a factor. And we're going to be a factor here. I look at the crop ratings on winter wheat being around 30% good to excellent all year yet we're still going to have a pretty large crop considering the crop ratings. Now it's not going to be a great crop but people are talking about the yields on corn and beans right now, they're hurting no question, but the ratings are still 60. Maybe they'll drop below 50 here this week, I don't know. But the fact of the matter is we can still have pretty good crops even with low crop progress ratings on a weekly basis.

Kohlsdorf: That kind of brings us into weather, the long-term weather forecasts are showing really dry and very little rain and the models have all kind of had agreement on this. Is that the thing pushing corn right now?

Gold: Well, I think that has been the biggest thing for soybeans and corn since last Friday when we had those lousy closes. The forecast changed hot and dry into the first week to 8, 10 days of August. Not going to have as much of an impact on corn. But right here in Iowa next Wednesday you're looking at 104 degrees. That is fairly unprecedented. It's 97, 97, 100, 104 and then starting to come back down. The West Coast of the country they're talking about 109 degrees in Washington State. Idaho, Washington State, Oregon all having extremely high temperatures. Not that that's going to have a huge impact, maybe a little bit more on the spring wheat than anything else. But the heat, when you look at these forecasts, that is what made this market move. That is why November beans moved almost $2 a bushel in five trading days. But we have to keep in mind that the market knows this, it's in the market, I think it's one of the reasons we backed off today later in the sessions and we've had a nice run here. And weather forecasts can change as we all know. What looks hot and dry today -- the forecast I saw just this afternoon looked like there were good rains pushing through Kansas, Nebraska, Tennessee, Kansas -- Tennessee, Arkansas, Kentucky, all areas that needed rains. Now, they've had some flooding but the fact of the matter is some of the really dry areas are getting some good rains. So there's a little bit of a balance here and we'll see if the forecasts hold up.

Kohlsdorf: Well, and that kind of leads us to our Twitter question. So with the 2-week forecast ahead very hot and dry, even though there is some rain as you mentioned, all other fundamentals known where does the price go from here in the next few weeks? What about winter and spring prices?

Gold: Well, if I knew that I'd be long retired by now. But I can say that we put a lot of this into the market early, we react early, the media is on top of it so all the news is there and you see these forecasts and the heat dome and certainly if the weather holds hot and dry next week we could move higher. If the funds want to add to their long positions in corn and beans the can certainly do that. Where do we go fall, winter? I think whatever crescendo we hit, we'll hit it really in the next week or 10 days is my guess unless we get to the third and fourth week in August and those predictions are hot and dry and the models were all in agreement with that. We make the beans in August. We don't make the beans in July. We're still in July. Yes, it's going to hurt. We're pretty much getting through pollination now in a lot of the areas so heat isn't going to have as big an effect on the corn but on the beans that could be a different matter. So if we do get hot and dry those last two weeks of August we could certainly move them higher.

Kohlsdorf: Yeah, is the heat dropping any notion of record crops with beans right now?

Gold: Well, I still think you could have a pretty good bean crop. Are we going to be 150 something, excuse me, 177 on the corn yields? Probably not. I saw one estimate yesterday 175 but we've had some rains and now it's going to get hot and dry again. Is that going to hurt it again? I was talking to somebody at a conference today and he was betting on 170. I don't think we're going to go that low, I really don't, unless it really gets furnace hot and virtually no rains. But it's still a weather market, we're still in July and August and we're still subject to the heat.

Kohlsdorf: Yeah, all right well we'll move on to cattle. So, temps yes in the triple digits expected this week. Is the cattle market feeling the effects of the heat?

Gold: I think there's no question about it. We've moved a lot of cattle into the system to get them off the feed. There's no feed in a lot of areas so they've got to bring these cattle in. We know that there are some losses out there. Black cattle can't handle this heat so they're going to slaughter. As we push forward, where are we going to get the numbers from forward? We saw that the cattle numbers themselves are a little bit lower than a year ago. We did see placements a little bit higher than were expected and that put the feeder cattle market under some pressure. But as much as anything else the feeder cattle market has been following the corn market. The corn breaks, feeder cattle rally, the corn breaks, we get the rallies, if corn moves higher we see lower feeder cattle prices. But overall the charts don't look all that bad to me in either cattle or feeder cattle. The boxed beef demand has been strong. Cash prices up to $145 in Iowa this week. So those are good prices. Yeah, it's $137 in Texas, it's $138 in Kansas, there is a big disparagement between northern and southern cattle and I think that is because those southern cattle are coming into market. But once that gets cleaned up I think we can see futures and cash prices move higher around the country.

Kohlsdorf: Okay, well you kind of answered my question about what is kind of pushing the feeder market around, higher corn prices. With recession concerns, how much is this going to impact consumer demand? You have a minute.

Gold: Well, I like to think that the demand is going to stay pretty strong for beef. The stock market, we talk about recession, but the stock market has been on a pretty good rally the last three days after the interest rates were announced, after the GDP. We're moving significantly higher. That is telling us that the market is less concerned about a hard deep recession. It may be a smaller long-lasting recession. And that I think is a little bit friendly for the markets because everybody has been so bearish maybe that is what we're seeing out here. So even with recession I'm hopeful that the cattle market can stay and stay good and see some good demand out here. Stock market is strong, people have money to buy more beef.

Kohlsdorf: All right. Thank you, Mark.

Gold: Thank you, it's a pleasure to be here.

Kohlsdorf: Yeah, nice talking the markets with you today. All right, well we will continue the conversation with Mark and answer more of the questions you’ve submitted in our Market Plus segment. You can find it on our website of MarketToMarket.org, in podcast form and on YouTube. All of these resources are free. It’s hot out there, we talked about that a lot today and it is for much of the country. You can help us see how your summer is going with a few shots from around the farm. Post a few pics, tag them @markettomarketshow and then give us a follow. Next week, we look at how container ships get a new port of call in the Great Lakes. I’m Brooke Kohlsdorf. Thanks for watching and have a great week.

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