The weather window is still open, but closing out hot and dry air over the commodity trade. For the week, the nearby wheat contract fell 15 cents and the July corn contract added a penny. China returned to buyer status in the soy complex. The July soybean contract held on for a penny gain while July meal improved $7.70 per ton. July cotton shrank by $2.76 per hundredweight. Over in the dairy parlor, July Class Three milk futures went up 65 cents. The livestock market was mixed. August cattle gained $6. August feeders added $7.05. And the August lean hog contract cut $1.23. In the currency markets, the US dollar index increased 70 ticks. July crude oil expanded $2.93 per barrel. COMEX gold strengthened $24.70 per ounce. And the Goldman Sachs Commodity Index was up almost 9 points, to settle at 578.25.
Yeager: Joining us now is regular Market Analyst Mark Gold. How are you doing, Mark?
Gold: I'm just fine. How are you, Paul?
Yeager: You know, I'm fine. Markets are up this week. You didn't have to temper too many downsides, except for wheat. Egypt is having an issue where they are sourcing some grain differently. Can the United States come to the rescue and be of service to Egypt now?
Gold: I doubt it. The Ukrainian crop is getting bigger and bigger. I don't know how they're growing all of these crops in the middle of a war. But their total grain production is going to be up, specifically wheat and corn. And even talking about some other crops as well. So, I don't think the U.S. will garner that business. The last week the Egyptian tender, Romania, Ukraine, Bulgaria were the big sellers to them. And I don't think it's going to change. Black Sea wheat will get to them.
Yeager: Do you sense that the Ukrainian crop is in any more dire straits than what we've heard?
Gold: No, the reports are telling us it's better. And the problem is with the sanctions on Russia and Russia having such a tough time with their wheat, it's now they're pricing themselves out of the market because they just don't have as much wheat as they need.
Yeager: We're still in that trend where we're about halfway back to what we've been for four months. But we're still above that level. Are you in a position that you want people to be thinking about selling right now?
Gold: Well, we've been telling people for the last couple of weeks on these rallies in the corn market and the bean market and the wheat market, sell some more up here. We're selling 10% at a crack here and there and making some sales and we're keeping puts on for what we don't have sold. But there have been some opportunities. I hope some guys took advantage of it. We'll see where it goes. But people are talking after today, because they were really pretty weak closes, you had some changes in the forecast, well there goes the market, it's over. You're in June. You don't make a corn crop or a bean crop in June. You make a corn crop in July and a bean crop in August and there's still plenty of time to get hot and dry between now and then. It's been a forecast for quite a while. Some of the longer-term forecasts look hotter and drier, particularly east of the Mississippi for a change. So, that would be certainly a knock to production if we do see some kind of heat this year.
Yeager: So, are we in a weather market for corn specifically?
Gold: Not today.
Yeager: Prior to today?
Gold: I would have said earlier in the week maybe because the forecast, I didn't see a whole lot of rain in the forecast. We had temperatures pushing 100 degrees in Kansas, 95 in Nebraska, Illinois got hot. So, it was on the cusp. And then we kind of hung in there until really today and then decided it looks like there's more rain, cooler temps and we backed off. But again, it's June. So, I don't get too excited about that.
Yeager: Well, that's, I want to ask you a follow up to the new crop side of things, the old crop side. You were here recently and you were basically begging people to sell, telling people it was an opportunity to sell. Did enough farmers take advantage and sell, in your opinion?
Gold: Well, I don't know that yet. Our farmers did a pretty good job of selling some more grain. But the big question is going to be, everybody is talking about the acreage report, what's that going to do? Are we going to see less corn acres, more bean acres? I think the more important report may be the stocks number. If we see that the stocks on farm have come down dramatically and shifted out of the farmer hands to the market, that gives us a chance to rally these markets. If they're still long all this corn and a fair amount of beans, even if we do have a heat related rally this summer it's not going to be the kind of rally that would knock your socks off because farmers will need to sell into that rally some more.
Yeager: On the new crop side, we just put up that chart, you mentioned this weather issue, we're mostly planted, things look decent in some areas and I'm sure you've heard from people who say, it doesn't look good for me. What if I'm in either a moderate spot or a not so good spot? What do I do?
Gold: You keep some puts underneath you. They don't have to be expensive puts, but keep something underneath you for the next 60 days to get through that. If we do get a rally look to sell it. These markets aren't over I don't believe. We're looking at a China demand sticking its head up in the last week, almost 450,000 metric tons of beans out of nowhere because Brazil has problems. We don't know what's going to happen with the tax. First Lulu says it's going to be on, then we heard rumors that he had enough opposition that maybe it's going to back off. I haven't heard anything definitive on that. But we do know that corn demand has been incredibly strong and if we can get a little bit of push on the bean side that would be great too.
Yeager: I'm going to ask Ryan in Iowa's follow up question then to what you just opened the door to in soybeans. Could there be enough interest from China to drive demand high enough to see beans in the teens in the U.S.?
Gold: Well, we're not that far away from it. We're $1, $1.50 away depending on which contract you're looking at. And yeah, we could certainly see things change in a hurry here. If Brazil decides that they can't export enough and China wants to make sure they're covered -- there was a rumor this morning that maybe they bought some, China bought some new crop beans. So, all that will be helpful if it happens and certainly if China comes in and we see a million metric tons or another half a million, that's going to catch the market's attention and move it higher. Can it move it $1, $1.50? Maybe not on its own. But if we come in Sunday night and the rains aren't there and the temperatures are hot, combine the two and now you've got a market.
Yeager: Has the market become so complacent to China not buying new crop beans that any little activity, like you just mentioned, is enough to start something?
Gold: It's something and if we do see these sales show up, two or three cargos, it's really not enough to say, well this is it. We've seen China come in on the odd day and buy a few. But if we start seeing that consistently, a couple of days a week over several weeks, now you've got more to talk about.
Yeager: Before we put a lid on grains, of wheat, corn, beans, which one of them is in the most sensitive or reactive to weather?
Gold: Well, I would say corn right now because we've got good demand on the corn. We'll see if we do lose acres on the acreage report. But again, that stocks report, we've got to see those numbers come down if we expect to sustain any kind of real rally in these markets.
Yeager: This morning one of the network news stations had something on bird flu. When the mainstream press starts talking bird flu and its leap into cattle, what is that doing to live cattle in your eyes?
Gold: Well, live cattle are in its own little world right now. And you've got the cash market, the futures it's been a great deal for guys that have been hedging. They've been making money out of their hedges and making money on their cash cattle. It's been great for them. Now the futures finally came back here today, look strong and I don't think it's going to be all that of a major effect. As you say, major media has gotten onto it, it's a little bit late by now. There was talk that some of the, I think it was the Wisconsin Ag Secretary said, any animals going into the shows are going to need to be tested. Okay, that's fine. But I think it's going to become less and less of a story over time.
Yeager: Do you see it having the most impact on cattle in a market standpoint?
Gold: Yeah, I would think so. But it's not going to transfer to humans, even in the milk. They're going to test for the milk but keep the animals alive until they clear and then we're back to where we were. So, I don't see it as being a big deal either from the dairy side or on the meat side.
Yeager: We always kind of kid around here if we have one question, we need to ask about livestock it's cover feed needs. But that's actually a legitimate story in feeders right now. Has this been - have those folks missed an opportunity to get some feed needs covered?
Gold: No, you've still got relatively cheap corn and meal out here. I don't know that there's a big rush. If we start to get hot and dry you don't want to be left behind. Buy some calls to protect yourself and see where it goes.
Yeager: With feeders specifically it's always the story about inventory. Has that changed for you?
Gold: We don't see it. The numbers are low. I don't know where they're going to come from eventually. They will. Everything goes in cycles. But obviously with what is happening in the cash markets, what's happening now in the futures catching up to it, it's telling us that the animals still are out there. And look at the boxed beef prices, the demand is through the roof. Hard to believe with the economy apparently in such bad shape.
Yeager: Well, somebody wanted me to ask you when was the last time you purchased a steak and if you felt good enough about the economy and obviously people are.
Gold: I had a steak last night. I had a steak two nights ago. I bought steaks for the grill. It hasn't stopped me from buying meat. To me it's pretty inelastic, I'm going to buy it unless something crazy happens out there. But I much prefer a good cut of steak than I do a chicken leg. So, I'm a steak guy.
Yeager: Well, let's talk about hogs though for a moment, just make it awkward for us both. But on the hog market, they have continued to slide. This has been a $10, $20 move here in the last couple of weeks.
Gold: But what happened today? We watched the August cattle rally almost $4 or $5 off its lows, we had contract lows, didn't quite close high enough for a key reversal in the August contract, but it was one heck of a turnaround in the hog market. The hogs have been under pressure, lack of demand from China and just not a big demand here in the States. So, it's been under pressure. But maybe now we've finally turned a corner. I would have liked to have seen those August hogs make that key reversal. But it's good enough to start. We'll see if we can hold up next week.
Yeager: Chairman Powell announced this week we're keeping the interest rate as is for now, keeping the door open for a cut still down the road. The way that translates back to commodities has been in some of the things we've just talked about, right? Is it still consistent with some of the items we're buying at the grocery store?
Gold: I think it is. The interest rates aren't going to stop anybody from buying a steak or even a pork roast or whatever. Where it's going to matter is more to the producer, I think than it is to the end user of the product. But are interest rates actually going to go down this year? Are they going to stick in that one rate cut? Maybe just to do it. But I don't know that the economy justifies any rate cuts in here. Yeah, we've slowed things down, but we've still got inflation out here. Go try to rent an apartment in Chicago. Go try to buy a house anywhere around Illinois. Try to buy farmland. Inflation is long but dead.
Yeager: And we are short and out of time. Thank you, Mark, good to see you.
Gold: Great to see you. Thank you.
Yeager: Appreciate it. We are going to pause this Analysis and continue our discussion about these markets in Market Plus. You can find both Analysis and Plus on our website of markettomarket.org. Our summer school assignment is to check out our Classroom section of our website. It is ready for the study of commodities, science and technology, along with new markets. Head over to markettomarket.org/classroom. Next week, from immigrant farm boy to longest serving cabinet member. Thank you so much for watching. Have a great week.
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