Howell: This is the Friday, February 15, 2019
version of the Market Plus segment.
Joining us now is Mark Gold.
Mark, welcome back.
Gold: Thanks, Delaney.
Nice to be here.
Howell: Mark, I had to cut you off there right at the
end of the program.
We were talking about the lean hog market.
Give us the rest of your thoughts.
Gold: Well, how high can hogs go this summer?
$85, $90 has been a really tough area to get through
over the last 30, 40 years in the hog market.
We took it out one time when we had the PED scare
and the virus sent hog prices through the roof.
But in general that $90 mark is a really tough
mark.
The way the hogs have been acting if we can get a
Chinese deal I think that's a realistic target
and I can't imagine what would stop it if we do get
some real good Chinese buying in here.
We know they want the pork, we know they want
protein, so hopefully we can see some higher
prices.
Without the trade deal there's still an awful lot
of risk.
We know that $50, $55 wouldn't be out of the
question if we don't get a Chinese deal.
Howell: When you look at pork cutout values we've
seen the lowest values since December of 2009.
We've seen still pretty good domestic demand and
international demand.
Why are we seeing such a low pork cutout value?
Gold: We just have a lot of hogs and demand has
been good but when you expect all this Chinese
buying and all of a sudden it's not there the market
has to readjust for it.
So I think what we'll see is pork being featured
more at the grocery level and that can make a big
difference.
And there would be no reason why they shouldn't.
The consumer wants some lower prices.
Pork is a great alternative.
And hopefully we'll see it catch up and eat through
some of these numbers and see some of these cutouts
move a little higher.
Howell: Yeah I know when I go to the grocery store
pork has almost always got good prices, good sales
and what not.
What about when you look at the USDA data dump that
we talked about on the main program that is
coming out next week with the export sales?
Will that add some volatility to the pork
markets if we see confirmation that yes,
China is indeed buying more pork?
Gold: I think that will certainly help.
Without it it's a case of the good news will rally
it, the bad news is going to break it.
It's really that simple.
I hate to see all of our eggs in this Chinese
basket but when it comes to corn, beans and pork
it's the game.
And what really concerns me is when President
Carter put on the embargo against the Russians back
in '79 not only did we lose our biggest consumer
but we turned our best consumer into our biggest
competitor over the next 20 years.
And I think what's happening with China is
we're losing our best customer and we know that
they're going to be planting more beans and
more grain, we don't want to see the same thing
happen where they become a big competitor as opposed
to a big purchaser.
So hopefully we can get things worked out and get
this deal done.
Howell: Yeah, hopefully and hopefully they don't
become a competitor in the feeder cattle markets.
We didn't get to really talk about that during the
main show.
But feeders have also been in this kind of range
since the beginning of January, $140 to $145.
What is it going to take for us to break out of
that?
Gold: Well, we had a running start at it today
with the lower prices in the feeders.
We've been in this wedge formation on the charts
getting very close if not we might have even taken
it out today on the downside.
That certainly opens up the door for more risk out
here.
The feeders haven't performed nearly as well
as the cattle have over the last several weeks.
I'm not sure really what's behind that.
We've got relatively cheap corn out here but the
feeders can lead the way and that's, again, one of
the things we talked about the fat cattle making a
cyclical high, if the feeders are going to move
lower that really plays into the hands of some
lower cattle prices as well.
Howell: And we've got a question here on social
media.
We got a lot of great questions in this week so
folks, please do continue to send those.
Matt in Amherst, Wisconsin said, will the Australian
flooding impact our cattle prices here?
Gold: I think that's a little bit of a stretch
certainly in the near-term.
They lost I think it was 300,000 head to the
flooding there.
It's a large number.
It's a bite out of their production.
But in the long run I don't see it as being a
major factor.
The market has been a little bit positive here
in the fat cattle market the last couple of days
but with the selloff in the cash I think it's just
all indicative that it's not going to be a major
player.
Now, if it continues to flood and they start
really ramping those numbers up then certainly
come June and July when we're expecting more
cattle anyway if they're not there to participate
in that, that could be supportive.
I just don't believe we'll see those kind of losses.
We haven't seen them to this point and hopefully
for the Australians they won't see it.
Howell: All right, Mark, we've got to talk about
oil.
The last time you were here in December we talked
about oil maybe hitting that bottom end.
Now we've got Philip in Dresden, Ontario @Agridome
on Twitter.
Would a resurgence in oil prices over $100 help corn
prices or is that simply a non-starter based on the
present economic and political reality?
Gold: Well, if we're going to see $100 oil again it's
going to be coming from a couple of factions.
First of all, output whether it's the Saudis or
the OPEC countries do something in terms of
production that will do it.
But the other input is the American economy.
The American economy still maintains its strength.
The stock market I think is within 5% or 7% of its
all-time highs.
If we continue to perform well for an economy then
oil prices can go higher.
What will that do for corn?
Certainly with the amount of ethanol we've got out
there, the higher the crude oil prices go,
that's a boost for ethanol.
Better moving away from some of those big ethanol
stocks helps the corn market certainly.
So is it enough on its own to move the market?
No.
If we grow another big crop is it going to make a
difference?
No.
If we don't have a Chinese deal, no.
But if we can put a couple of things together that
would certainly help the corn market.
Howell: Okay.
Going off of that then we've got Connor in San
Diego, California saying, why is oil this high?
Gold: Well, I think it's this high because the U.S.
economy has been pretty strong, number one.
We've seen cutbacks from some of the OPEC
countries.
So it's a manipulated game out here.
The Russians certainly want higher oil prices.
It's the basis for virtually everything they
do out there around the world, it finances all
their little expeditions.
So they're certainly in favor of higher oil
prices.
So in the meantime we're just kind of in a
meandering range.
We hit the $30 lows, we've rallied and seen $80 and
$100 and even higher prices.
We're sitting here in this range.
Can we move it higher?
Sure.
But I think it's going to be as much a function of
the U.S.
economy because we've seen it being very sensitive to
the stock market and if the stock market does fold
again then I think we'll see some lower crude oil
prices.
Howell: Okay, Mark, we talked about this during
the main program a little bit, marketing ahead.
We've got a question about that from Dave in
Missouri.
He said, where should farmers be in regard to
having new crop soybeans and corn hedged or
contracted?
And at what levels would you sell your entire APH
bushels?
Gold: Well, if I'm going to sell my entire APH
bushels it better be at a pretty good level,
certainly better than where it is now.
But the fact of the matter is we're in a unique year
here.
Farmers for the last three or four years have missed
these early opportunities to sell grain and we've
always been a proponent and still are of selling
grain long before harvest.
Could this be the year that farmers sell out, if
we get a rally to $4.20 corn, $4.30 corn, $9.90
beans, $10 beans, are farmers going to take that
and say thank you very much?
We think that's certainly possible if we get that
kind of a rally.
If we do and we see a big shift of the farmer owned
grain getting into the system, out of the farmer
hands, that's a strong sign to me that these
markets can move higher.
So if you are going to get aggressive in selling
grain whatever levels this year whether it's today,
whether it's in May or June on a rally or July, I
would certainly want to keep the upside open once
you sell that grain and look to buy a call option
because as I've said many times, the market will
only go up and stay up once it's out of the
farmer hands.
So if we do shake a lot of grain out early I think
that's a very positive sign for the grain markets
and if you're one of those selling it out early I'd
certainly reown it with a call option.
Howell: That does kind of pose an interesting idea
that maybe this year farmers are going to be
just thankful that we have $4 corn or near $10 beans.
In talking with your customers is that kind of
the mindset that yes, I just want to get rid of
it, the futures options out on the board are
relatively good prices?
Gold: I don't know that that's the majority of the
thought process out there.
I think they're looking for a good opportunity.
We keep telling them in our email to look for
these opportunities and we've got price levels set
for them that for whatever reason we get there we're
going to sell grain.
But again, I think that if we do sell grain early we
certainly want to reown it with a call option.
We've seen surpluses switch in a heartbeat in
these grain markets and I think the worst thing that
could happen to the American farmer this year
is they sell too early and wind up missing a nice
rally this summer.
They'll be kicking themselves.
On the other hand if we do get a good rally they
don't want to watch it wither away by harvest and
then be in worse shape than they're in today.
So you're in this dichotomy of I want to
sell to avoid a problem.
Well can it go higher?
So to me the only way to play that game again is
with the options.
Howell: With the options.
All right, Mark Gold, thank you so much.
Gold: Thanks for having me.
Howell: Join us again next week when we'll take an in
depth look at the trade ahead of a major deadline
and Dan Hueber will join me at the Market to Market
table.
Until then, thanks for watching, listening or
reading.
I'm Delaney Howell.
Have a great week.
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