Pearson: This is the Friday, November 1, 2013 version of the Market Plus segment. Joining us now is Mark Gold. Mark, welcome back.
Gold: Nice to be here.
Pearson: Well, we're glad to have you back. We've got a lot of questions from folks. But before we get into that we are through the end of October, we're through the end of crop insurance pricing. They put out some preliminary numbers, $4.39 I want to say and $12.87 for corn and beans respectively. When you're out talking to customers, talking to farmers, how does crop insurance, how is that perceived?
Gold: Well, in my opinion, if you're going to be a modern American farmer you have to have good crop insurance, in my opinion, most cases revenue insurance in order to protect yourself from the weather problems that can exist out there. And certainly the revenue -- we don't sell crop insurance at Top Third so what guys do there is their business. But we're strong proponents that in order to be an effective marketer you need to have crop insurance. I bet a lot of American farmers believe that if they've got the revenue enhancements on the crop insurance that they don't have to do any marketing. I disagree with that. For example, this year may be a great year, we started near $6.00 corn, got down to $4.40 corn in here and if you got above trendline yield or above APH yield on your farm chances are you're not going to see a payment out of that revenue insurance. That revenue insurance is really there for the bushels that die that you don't grow, not the bushels you grow, and particularly when you're above your APH. So if you're a 1,000 acre farmer out there with 150 APH you've just lost the income of $1.50 roughly on 150,000 bushels of corn. That's a lot of money because you thought the marketing was protected with the crop insurance. It isn't. You need to combine the two. What the crop insurance allows you is many more marketing opportunities. It allows you to do things, even with some short-dated options depending on in February and October and some of the averaging periods to do some real interesting things to protect those payments. But you've got to combine that good crop insurance with an effective marketing plan in order to really maximize your potential out there in terms of revenue.
Pearson: It's all tools in a toolbox.
Pearson: You need all of them to make things work. Now, as we move to questions, William in Kiawatha, Kansas is asking, store corner beans or empty the bins? And we know your thought on beans, get them sold. What do you think on corn?
Gold: There's no carry in the market so sell the beans. On the corn if you're going to put it in the bin for whatever reasons you've got to capture the carry. Go out to December '14 corn, go to the elevator, get that deferred price and sell it. I just don't see that there's a lot of upside potential in this market. Big crops tend to get bigger. I think by the time we get to the January final numbers if we're at 162, 163 on the corn now we could get it up to 164, 165 by then. If beans are 42, 43 we could be 44 by January. That tells me it's going to be hard to rally this market. The Chinese came in when the government was shut down, snuck in, bought an awful lot of grain cheap and now I don't know that we're going to see that kind of buying in here. So I still remain negative on corn and bean prices out here. So sell the beans, buy back some calls. If you're going to store the corn sell the carry so you can capture that 40 cents that is there.
Pearson: Alright. Now, as we're talking, this drop in corn and bean prices, we've seen corn fall a lot faster than beans. James in Kremlin, Oklahoma is asking, are we going to see an acreage shift next year? At these price levels will soybeans be buying some acres from corn do you think?
Gold: If you look at the new crop prices for '14 I'm not so sure. You've got December corn out there at $4.66, you've got new crop beans out there at $11.45. I'm not sure that's a big enough incentive. And farmers love to plant corn. They love to look at corn, grow corn and harvest corn. That's their favorite and that’s what the American farmer loves to do and God bless 'em, that's great. So I don't know that we're going to see a whole lot of change in those numbers. Now, certainly some of the corn on corn on corn are they going to want to go back into some kind of rotation? Maybe. But I'm not sure that there's enough economic incentive to see a big shift right now. If I had to take a wild guess I'd say maybe we'd see a million or two acres shift. But, again, if we see a huge Brazilian or South American soybean crop and we really push these beans down I don't know that I'd count on it.
Pearson: Alright. Now, one of the topics we didn't get a chance to discuss in the show was cotton. We've seen cotton on a slide now for about the past month. I want to say we lost another $2.50 this last week. Just market stagnation? What's happening?
Gold: Better weather, some rains, the crop looks pretty good, demand hasn't been all that stellar or standout anyway. And with the drop in the corn and soybean prices it's hard to keep those cotton prices up on their own. So I think that has been the problem. There's still some more risk out there. Longer term I like the cotton market but not quite here, not quite now. Maybe after the first of the year.
Pearson: Okay. Alright. We've got a question here from Josh and Amanda in Iowa and it looks like they raise cattle. And their question is, as we watch this corn market fall we're not going to see much of a switch from corn to beans, their question looking at it from a cattle side, particularly in the Corn Belt, Iowa, Illinois, Nebraska, we've seen a lot of pasture land planted to corn. As these prices continue to slide will we be able to see cattle buy back some acres from corn or at least slow that trend?
Gold: I don't know that I really have a good answer for that. The cattle market, I don't know whether that's going to be the real driving force behind the cattle. If you want to know where cattle prices are going to go I'm going to say keep an eye on the stock market. If we back off on the Fed tapering and the stock market gives way here you've got a lot of people nervous and that’s going to have an effect on our own domestic consumption of beef in my opinion. Certainly if hog prices stay high that will be a helping factor for the cattle prices. But you have to watch the stock market I think first from a demand side. Then I think you have to look at the production side. We've had a lot of bad news on the production side, whether it was Zilmax, whether it was the storms in South Dakota and North Dakota, we've lost a lot of numbers, we pushed cattle to record high prices. Is there going to be something else that is going to continue that? It's certainly possible out there. But when you get to these kind of historic prices, $134 fat cattle and $165 to $170 on the feeders, you just, in my opinion as a risk manager, you can't afford to watch this thing go south for whatever reason. I've been around these markets 40 years and we've seen so many times in the cattle market some black swan that flies over and hurts this cattle market for whatever reason. So as a risk manager long-term I look at the low numbers, I look at demand being good, I look at the problems with hogs and you've got to think cattle can stay up here. As a risk manager I just don't know where prices are going to go so when I see record not only contract highs but historical highs I'm protecting those values.
Pearson: Right. It's a lot of cash on the table.
Gold: A lot of cash on the table.
Pearson: It's a lot of value in your feedlot, whatever it is, lock it in here while we can. Well, thank you so much for being with us, Mark, appreciate having you with us on the show today.
Gold: Thanks, Mike.
Pearson: And thanks to all of you for sending in your questions via Facebook and Twitter. Please continue to do so and we'll continue to get expert analysis right from our experts. Thanks for watching and have a great week.