Grain markets moved sharply higher in the wake of the report. And while Mother Nature wasn't nice to crops this week, she was at least friendly to grain prices. For the week, September wheat gained 7 cents, while the September corn contract moved 28 cents higher.
Soybeans, however, failed to follow the coarse grains higher, as the September contract declined 21 cents. Nearby meal prices also declined with a weekly loss of $6.30 per ton.
In the softs, cotton edged slightly lower as the December contract settled Friday with a weekly loss of 19 cents per hundredweight.
In the dairy market, August Class III Milk futures gained 4 cents but the deferred contract declined by nearly 50 cents.
Over in livestock, the August cattle contract gained a-buck-and-a-half. Nearby feeders were off $3.35. And the October lean hog contract lost 55 cents.
In the currency markets, the Euro advanced 22 basis points against the dollar. Crude oil lost more than $4 per barrel. Comex Gold traded in record territory again this week before settling Friday with a weekly gain of $19.70 per ounce.
Pearson: Joining us now is our old friend Mark Gold. Mark, good to have you back on "Market to Market." Gold: Well, thanks. Nice to be here, Mark. Pearson: Well, you picked a great week too. It's a wild one. Let's talk first about the world, Mark. The commodity prices have been on a huge roll. Problems in Europe with the euro, now Italy is an issue over there. Concerns about euro and a strengthening dollar. We've had the wind at our back with this cheap dollar for some time. What do you see ahead on that? Gold: Well, the dollars -- you know, to me it's still the one safe haven. You look at the bond market, we made new highs in the bonds indicating lower interest rates, which seems a little bit contrary to everything that's happening not only here - Pearson: The negative credit watch. Gold: So if you expect that we're going to start downgrading maybe the S&P on the U.S. debt, what are the interest rates doing going lower? Hard to figure out. We may have pushed things too high this week in the bond market. A little bit of a sell off late in the week. That may be it here temporarily. But as far as the dollar goes, we're printing so much money. It's hard to get friendly to the dollar, except that where else is the money around the world going to go except into the dollar and that's why we saw the bond so strong. They don't know what else to do with it. Gold and bond seem to be the current safe havens for all the confusion that's going on around the world and uncertainty. Pearson: All right. As you mentioned, gold did move up to record levels. It backed off a little bit. What's your feeling on gold, Mark Gold? Gold: Well, the gold market did put in key reversal on the October contract. In these markets, though, I'm not so sure how reliable these technical indicators are. I probably wouldn't want to be long gold here. One of my friends, Dennis Gartman, who is another analyst out there, liquidated some of his positions, and he saw that key reversal, like all of us did, and got a little leery. So I'm a little bit apprehensive in the gold market. We've come so far so quick. But the gold market, even when silver went from 52 -- $51 an ounce down to 32, we only saw the gold go from, like, 1,500 an ounce down to 1,400 an ounce right back to making new historic highs here. So there is something underneath. But there's an old saying that when the world wants a commodity, you sell it to them, and when the world wants out of it, you buy it. What we've seen is South Korea buying an awful lot of gold in the last three months. So the world wants it. They're buying it. Maybe it's time to let them have some of it. Pearson: All right. Let's talk about the energy prices can be a huge drag on the economy. We've had quite a break on oil this week. What's your feeling there? Gold: You know, $15 from just a week and a half ago from $100 a barrel down to 82 were the lows this week. We settled around 85 bucks, I think, on the nearby contract. If the economy is going to say weak, crude oil is going to stay weak too. Again, we have all this worldwide pressure coming into all these economies. And if we see the problems in Europe hit the United States, it's not good for the oil market, not good for the economy, and oil can certainly move lower. We'll have to see how it holds around the $80 level. If we start taking out $80 on the crude, to me that opens up the door for a significant break. Pearson: All right. All right. Well, again, some good news for the general economy. Let's talk about our stuff. Let's talk about the wheat market first. Obviously we've got huge issues with dry weather. We were able to get the wheat crop out in fairly good shape. What's your take on wheat prices, and do you want to be a seller in here? Gold: Well, the big question in wheat right now is Kansas going to be able to plant next year's crop. It's so dry there. I just got back from Wichita last week, 108, 110 degrees. I've never even experienced heat like that. A good three-quarters of that state is in serious, serious trouble. So now we have the concerns of getting this crop in. If we don't get this crop in, protein wheat prices can certainly move a lot stronger. The drag on the wheat market right now has been the Russians. They've gone from producing 60 million metric tons a year ago to 90 million. They are in the export market. They are trying to buy back what they lost when they put on these bans by cheapening the price to try to win back some of their clients. Now, they've been very aggressive in the wheat market. Just this week we've started to see our wheat get a little more competitive, but that's going to be the drag on this market is the Russian wheat in the short term. Pearson: All right. Are you selling wheat right now? Gold: No, I wouldn't be a seller here until we see some moisture in Kansas. Pearson: All right. Let's talk about the corn market. And we're getting a lot of anecdotal stuff right now. We're going to get this USDA Report next week. What are your thoughts on that? You heard the Informa numbers. Do you think those are close? Gold: You know, it's hard to see how they only came down to one bushel really from their last report -- from last month's report from the government. We're hearing all kinds of fairly wild guesses out there on yield 150 down to 145. Some of these weather people are getting a little more aggressive on it. I'm not so sure we're anywhere near there, but I do know that if we start seeing these yields under 152, 153, now we're in a very tight situation for ending stocks and you've got to fudge some numbers. Now, on the positive side, you're hurting demand dramatically in the corn market. We're seeing ethanol backing off. Certainly feed usage is backing off. And these can be bigger numbers, I think, than what most people would predict out here. Some of it's shifting into wheat and other products. But the fact of the matter is corn demand is coming down, and that's long term going to be a little bit negative toward prices. Pearson: All right. Tight carryout, though, into next year? How concerned are you? I know having heard you talk many times, your big issue is getting control of volatility. We've had a question from a viewer of ours named Phil in Iowa. He said, hey, what about 2012, '13, '14? Should we be taking advantage of prices because, you're right, we can scale back this demand? Gold: Well, Mark, I can't tell you how high prices can go if this drought continues. Certainly we could see higher prices. But I can, I believe tell you how low we can go in the next eighteen months, and that's back under the cost of production. It had always happened no matter what the highs were over the last hundred years; we've always gone back under the cost of production. First of all, these high prices will cause farmers all over the world to plant more grains. We're going to see perhaps Brazil this year harvest 40 million metric tons of corn, not soybeans but corn. That's going to be a huge competitor with the U.S. in the next twelve months. Once we get these prices back under the cost of production, what people have to understand is part of the efficiency of the market is to get out the inefficient producers. We see these high land prices. Are they going to hold? Well, when prices go back under the cost of production, I'm not so sure. So those are all factors we have to take into account in this corn market. Pearson: Real quick, soybean market, what do you see there? Gold: Soybean market, we're getting pretty good rains. I just saw some fields in Iowa over the last week that look fantastic. Obviously the farther south you go, the worse they are. But overall, the soybean market seems to be a little under pressure, but we still have the critical growing season ahead of us. If it turns hot and dry, soybeans can move higher. Pearson: All right. Again, you're not in a hurry to sell beans either? Gold: No, not right at this minute. We want to see how all of this kind of shakes out a little bit, but we certainly would be protecting the down side on all of these commodities that are near record prices. Pearson: All right. Let's flip gears. Let's talk about the livestock market, Mark. We saw the pictures in Texas. We're seeing a lot of not cow liquidation but cow sales down there that, except for a break last week, have held on pretty strong. They're liquidating cows but they're finding homes. Gold: You know, we went down to 106, 107 on the cash a week ago. We're back up to 110 to 112. Futures are strong prices in here. It's amazing considering what the economy has done with the stock market because we've seen them track each other so closely over the last several years. The stock market fell out of bed, but the cattle remain strong. We know the numbers are as low as we've been in fifty some odd years in this cattle industry. We pushed so many animals ahead in here. I don't know where we're going to draw the cattle from in the next three or four months. If you look at some of the pricing out there right now, it's going to show us that we're going to be tight on this cattle market at least through December. You know, we're going to see -- I believe you've got this feeder cattle market relatively flat across the board within a $3 range. I can't believe we won't see some higher feeder cattle prices down the road. Pearson: All right. So stronger demand, hopefully. And again, very reduced supply. Gold: Reduced supply. Again, if the stock market continues to fall out of bed, are we looking at another 2008 where everything gets hit because of that economy? If that's the case, I don't care what the fundamentals are in any of these agricultural products. If the stock market fails, all of this could be in trouble. Pearson: All right. You mentioned supply. You mentioned exports earlier. In South Korea, pork has been a huge export item. The strengthening dollar will cool some of that, or is that demand going to overpower that? Gold: The Chinese want the pork. We've seen, you know, six out of seven days new record highs in the pork market. What I'm seeing is this hog cycle coming back into swing. When I went to ag school at the University of Illinois in the '70s, we talked about the hog cycle. Nobody has talked about the hog cycle since we had -- hogs in 1997. But the fact of the matter is, $100 hogs, we're starting to see some of these confinement get operations up and running again. More people are going to come back into it. You've got high price, low production, what's the farmer going to do? They're going to fix that by going into production. And I believe with these kind of prices, you've got to protect that risk. And going out -- kind of going back to the other question, you can't afford not to protect these prices over the next two or three years. If we go back under the cost of production and you are paying what you are for input costs out there, you're going to be caught and it's going to be a problem. Pearson: Mark Gold, thank you so much. That wraps up this edition of Market to Market. But if you’d like more information from Mark on where these volatile markets just may be headed, visit the "Market Plus" page at our web site. You'll find "Expanded Market Analysis," audio podcasts, streaming video of our program and links to our Twitter feed and Facebook page-- all FREE -- at the Market to Market Web site. Pearson: And be sure to join us next week when we'll examine the market impact of USDA's much-anticipated August crop reports. Until then, thanks for watching. I'm Mark Pearson. Have a good week...