Pearson: This is the Friday, May
8, 2015 version of the Market
Plus segment.
Joining us now is Mark Gold.
Mark, welcome back.
Gold: Nice to be back.
Pearson: And we are glad to have
you.
We did not get a chance to
discuss cotton on the program.
Tell us your thoughts on that
market.
Gold: Well, the cotton market to
me looks pretty good in here.
You look at the chart, it tells
me that we're trying to build a
long-term, nice broad-based
bottom in this market and this
is typically the kind of bottom
that could lead to a more
extended higher prices in the
future.
Now, fundamentally I don't see
anything that really would
justify it.
But as my experienced has been
garnered in over 40 years in
this business I would say that
generally a market is led up
first technically before the
fundamentals can justify it.
So, can we see this market move
higher and then maybe get some
news of why it's moving higher?
I think that is certainly
possible.
At the moment if you've got some
cotton sold I'd certainly look
to buy back some call options to
try to keep the upside open.
Now the risk is certainly back
down to 40 cents in the cotton,
so you've got a 25 cent risk in
here.
Is that worth protecting with a
put if you haven't got anything
sold?
It is.
But in the meantime I'm looking
for some higher prices.
Pearson: Now, looking at just
the technical situation, what
would be the first level of
resistance you'd expect to hit?
Gold: Oh between here and 70
cents is going to be tough and
then it always gets tougher when
we're in the 80s, from 80 to 90
cents.
But I don't know that those are
outrageously high targets
considering where corn has been
in the past.
And we're coming off some pretty
low prices.
We made pretty good bottoms
where we should have.
And, again, I don't know what's
going to move it but it
certainly looks like the chart
is trying to move a little bit
higher.
Pearson: We get some headlines
and maybe it will kick it in the
pants and spur it up.
Gold: Hope so.
Pearson: Okay.
Well now also on the show we had
a little bit of discussion on
the highly pathogenic avian
influenza.
And we've got a question here
from Deitrich in Homestead,
Iowa.
And Deitrich is curious, with
the high loss of poultry to
HPAI, what effect do you think
that will have on the corn and
soybean meal market in the
short-term, which we discussed
on the show, and in the
long-term?
Could it have an impact?
Gold: In the long-term it could
if this thing continues and it
continues in a big way.
Now I just read, just before we
came on air, that not only may
the pathogen be moving because
of the birds and the bird
droppings but they think the
wind and the dirt may be
carrying it as well.
If that's the issue, are we done
with this?
We don't know that.
So in the long run if this thing
continues to move and maybe it's
going to move east, maybe it's
going to move north with the
winds, then it can have a longer
term impact.
But you have to realize we're
still talking about, at the
moment, some really relatively
small numbers.
It would have to be
significantly higher, five times
the amount of birds that we're
talking about now, 100 million
birds, that would really start
making a difference in this
thing.
But it is a headline that has
helped push the market down, the
corn market and the meal market.
But, again, hopefully the warmer
weather will end this thing and
then we can see the meal and the
corn have a nice rebound in
here.
Pearson: Now, watching how the
market has been watching this,
and you observe the markets
every day, how jittery is it?
If we get an outbreak in North
Carolina or a place near a high
broiler production area, would
that be a fairly major downturn?
Gold: That could affect it.
It depends on where and how many
birds are affected, how quickly
they catch it and is there any
sign of it spreading in those
newer areas.
Again, it's one of these things
we don't know.
I'm hoping that it's over.
At the moment, again, I don't
think it's enough of a factor.
But when we looked at the
viruses in the pigs it started
somewhere and it kept going and
that is when we put hogs to
record prices.
So these things can take a while
to settle out.
Hopefully this settles out very
quickly.
Pearson: Certainly.
Hopefully it's over but we'll
have to wait and see.
Gold: Yeah.
Pearson: Now, we also talked
about beans a little bit on the
program.
And Phil in Ontario, Canada has
a question.
He says there are seemingly
soybeans everywhere.
So how low could futures go this
summer?
And he is curious, could they go
sub-$9?
And could they go sub-$8 levels?
Gold: Make no doubt about it
that there is still tremendous
risk in the soybean market.
As he says, whether you're in
Ontario, Canada or whether
you're in Champaign County,
Illinois or whether you're in
Brazil or Argentina, there are a
lot of beans out there.
The Chinese demand has been okay
but not nearly as good as it has
been, in my opinion.
And the Argentinians are sitting
on 14 million metric tons of
beans.
They're not even done with their
harvest.
What is the total number down
there?
We believe that the Argentinian
crop, we will see it on the
WASDE report on Tuesday, the
USDA should raise it somewhere
between a million and, 1 to 2
million metric tons and we
believe it's closer to a 3
million metric ton bigger crop
than most people are thinking.
So he is right, there are a lot
of beans out here.
How low can low go?
I believe if we grow the crop
here in the U.S., we get this
crop in the ground, record
acres, we know what these yields
can do with marginal weather.
We don't know what these yields
can do with great weather and if
we add all this together, in my
opinion it could be sub-$8.
Pearson: Okay.
By harvest.
Gold: By harvest.
Pearson: Alright.
Well, now you mentioned the
Tuesday WASDE report.
Before we let you go, Mark, do
you have any thoughts or
anything producers should be
doing before that report comes
out?
What do you expect?
Gold: Well, at this point do I
want to be buying puts at $3.65
corn?
Probably not if you haven't
started already.
You hope to see something
positive out there.
Are they going to increase the
carryouts because of what is
happening in the poultry
industry?
Maybe just a touch.
Are they going to raise the
yield potential because the corn
is going in so early?
That's possible.
So if I was going to do anything
I would look at a very
short-dated put just to get
through the report.
Don't spend more than 8 or 10
cents.
But in case there is a shocker
out there you don't want to be
looking at corn at $3.65 going
to $3.35 and just sitting there
and holding your breath because
then if we do have good weather
in June you could be at $2.80 or
$2.90 by July 1st.
So while the charts look good,
we made a little bit of bottom,
we have to hold the lows that we
made Tuesday morning.
If we don't this corn market is
in trouble.
So I would still have, as a risk
manager, some kind of cheap put
on at this point to protect it
in case there is a surprise.
Pearson: Alright.
Mark, thank you so much for
taking the time to join us.
Gold: Nice to be here again,
thanks.
Pearson: And thanks to all of
you for watching over the
weekend.
Happy Mother's Day to all of the
mothers watching.
And we hope you have a wonderful
week.
Take care.