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Market Plus: Market Analyst Mark Gold

posted on February 24, 2012


Market Plus: Market Analyst Mark Gold

Pearson: This is the Friday, February 24, 2012 version of Market Plus.  Thanks for joining us here at our Market to Market website.  Tell your friends and neighbors.  We'd love to have them join us here as well.  This week on the show special guest Mark Gold.  He stops in periodically when his schedule allows.  Mark, thanks for being here.  Covered a lot of stuff on the show tonight, some broad issues and ideas but really always the common theme that I have heard you annunciate so well over the years and that is we've got to get control of some of this risk and we've seen that.  The producers who are the most successful are the ones who have harnessed this volatility to their benefit.

Gold: Right.  As long as I have been helping farmers, which is a better part of 17 years now, we've certainly seen an increase in interest in marketing activities.  And certainly, like you said, the best guys take a hard look at the marketing.  Now, we do things the way we do it, doesn't mean that we're always right or we have the only answers.  There are a lot of answers to marketing out there.  You have to develop your own marketing plan.  No matter what plan you follow you have to be disciplined to follow that plan and stick with it.  It's hard to take the emotions out of it.  Sometimes it helps writing down your marketing plan to stick with it.  But the fact of the matter is if you're going to be a successful farmer in today's markets you've got to take a strong look at the marketing.

Pearson: We've had some great questions through social media that have come to us.  And we've had some great questions that people probably need to talk to a broker about to get some input on.  A couple of questions that jumped off the page at me -- one from up in Minnesota in the wheat region up there.  This is from Tim and he says, with the end of the Canadian Wheat Board's monopoly -- which we haven't talked much about but that has been a significant shift, that has gone away -- will Canadian growers respond by planting more wheat in Durham thinking they can get a better price by doing it themselves?  That comes back to just what we were talking about.

Gold: Absolutely.  I believe that Canadian farmers aren’t that much different than American farmers and now that they have the opportunity to be true entrepreneurs and take their fate into their own hands they are going to plant more grain and try to produce more to increase revenues.  I think it is reasonable and logical to assume that.  And I believe that Canadian farmers do a pretty darn good job and I can't imagine that they wouldn’t increase acres not only in wheat but I think in more eastern Canada up around Ontario and that area they are going to plant more soybeans and more corn in that area as well.

Pearson: That Corn Belt is moving north, no question about it.  I was up in North Dakota this week and that really confirmed that.  I love the question from Pete, also from Canada.  If Mark Gold had a thousand acres in central Illinois, no fall applied nitrogen, what would he plant in 2012?  I know the answer to this one too.

Gold: Well, if Mark Gold had a thousand acres I would be selling those acres at $15,000 an acre and you'd catch me trying to play golf somewhere.  But the fact of the matter is if it was my choice with the insurance advantage toward planting corn I would certainly look at planting corn.  And I believe most American farmers are going to make that similar decision.  And, again, if we can get weather to cooperate this spring, which it hasn't been very cooperative the last couple of springs, I believe we're going to plant corn acres that you just don't believe.  I'm hoping we rein it in somewhere south of 95 million acres.  But if it is more than that I don't know that it's going to be a big surprise to me because the incentives are certainly there financially to plant corn.

Pearson: We had a lady write us from right here in Iowa.  Her name is Theresa.  Here is her question.  She said, love the way markets are headed for corn, beans and cattle.  My guess is always wrong because five years ago I said land prices were way too high.  But look where it is headed.  Please give me your input.  You just told us a lot about what you think corn prices are going to do and you made a very valid point during the show, prices pull back under the cost of production.  It is a weeding out mechanism.

Gold: There's no question -- why do prices move under the cost of production?  To force out those inefficient producers.

Pearson: And that is global producers.

Gold: That's globally, absolutely.  When we look at what is happening in farmland here today can you imagine if we didn't force out inefficient producers how many more people from the city would be spending $15,000, $18,000 for land, not even a clue what they're doing.  So you have to rein them in and the supply and demand, when we have $8 corn and when we have $16 beans farmers around the world will plant more of those commodities.  Demand around the world will be declining at the same time.  So farmers are about to produce more of what the world wants less of, what is likely to happen to price?  Go lower.  And how low will it go?  Back under the cost of production.  It has always happened.  Every one of the spikes we've seen in these markets since 1972, we've always gone back under the cost of production.  And until we suspend supply and demand I don't see that changing.

Pearson: The final question was from Alan in Iowa.  Is there any hope for new crop corn prices or has USDA put the death on it with their latest comments in the forum?  You think the death of it is going to come with that acreage number.

Gold: That is my big concern and I believe that the biggest risk for the American farmer is not being protected before that report and not being protected if we're looking at good spring weather.  Again, we don't want our producers caught with trying to market '11 corn and '12 corn if there is a real price problem out there.  We want them to be protected and in place today to take advantage of whatever may happen come after the report.

Pearson: Mark Gold, thank you so much for being with us.  I know you travel a lot, God Speed and safe travels.  For all of us here on Market to Market, I'm Mark Pearson.  Thanks for being with us here on Market Plus and, of course, watching us each week on your Market to Market program.  Don't forget we're coming into Festival, it's a great way to invest in quality programs like Market to Market.  If you feel we do bring you value, consider investing in your public broadcasting station.  For all of us on Market to Market, I'm Mark Pearson.  Have a great week.

 

 


Tags: agriculture commodity prices economy markets news