Pearson: This is the Friday, May 12, 2017 version of the Market Plus segment. Joining us now is Mark Gold. Mark, welcome back.

Gold: Nice to be back, Mike.

Pearson: Mark, we got so carried away on the program talking about Chinese beef demand, talking about soybeans, we skipped the cotton market. And that was a big move to the upside this week. What happened? Was it WASDE report related?

Gold: Yeah, I think it was that and good demand and it was basically old crop demand which is pushing it here. So the July really exploded. We were limit up one day, another penny and a half the next day, whatever it was. But it's a nice move in the cotton. Coming off these lows it's a pretty good break out, out here. Now, is it going to last? It looks pretty good from a chart standpoint. I think what it's doing is as the old crop rallies it's going to drag the new crop up and maybe give you a marketing opportunity in the new crop. But at least something is moving out here and it's nice to see that it's corn and, like you said earlier, it was up over 4 cents on the week and that's a nice move and guys need to be looking at that. Can it last? Why not?

Pearson: Push up north of 80, that's a good solid level, closed at 82 on the nearby.

Gold: I think that would be reasonable and hopefully we can push it to 90 cents before it's all done. Now, 88 to 90 would be a good area.

Pearson: On the old crop, you think new crop will follow along?

Gold: Yeah, to some extent. I don't think it will be, the real demand is up front on this export market and as long as that holds the old crop will continue to move. But that's going to drag the new crop up with it and usually that's a great marketing opportunity on new crop.

Pearson: You bet. Now, we've got a number of questions here from our followers on Facebook and on Twitter. We talked quite a bit about the demand for live cattle as beef gets hot. But Joe in Colome, South Dakota wants to know, will the feeder cattle market stabilize or continue on this roller coaster ride? We were limit up on Friday, all the deferred contracts. Do we see another limit up day on Monday?

Gold: It could be. I think that will be doubtful. The question is with this volatility could it be limit down? We've seen these limit up, limit down moves in here, we've had some gaps. I've always said when a market is at its high or a low we see the increase in volatility. We've certainly seen the increase in volatility in the last seven or eight trading sessions in both the fats and the feeders. So is that an indication that we're at a high? It's certainly possible out here. So I expect the volatility to continue. If we do get into one of these buy the rumor, sell the fact kind of markets we're going to see the volatility back off a little bit as this market comes down. But if we can spike it again on Monday, do something, approach those highs then this volatility up and down is going to remain in this market for some time.

Pearson: Okay. So it's extending our marketing period for calves.

Gold: Absolutely. You've got a great opportunity out here. It's going to bring some life into these markets. But guys need to be taking advantage of it. Look at where we've come from in just the last four months. This isn't something you sit on your hands. I was in Idaho last week with a group of bankers and I said, when this meeting is over it's not the time to think about telling your clients to do something, it's the time to pick up the phone and call somebody and say, hey have you looked at this market, let's get some puts or let's sell some cattle, let's do some futures or buy some calls against it, but now is the time to do something. I didn't know it was going to be limit down the next day. But the fact of the matter is there's things that can be done and we've had a nice rally, the puts are cheaper today than they were yesterday, take advantage of it.

Pearson: And you make a good point, we were limit down or almost limit down early in the week, limit up or almost limit up end of the week. There's that volatility.

Gold: We're seeing these five cent ranges in the feeder cattle market, which is exactly what we saw the last time we peaked. So I think you've got to be very careful in here. But, again, this Chinese news, it has been anticipated, it's here, if we can react past Monday or Tuesday to the positive side there may be another leg up in this market. So we don't want to just be naked short futures out here. If you're going to sell futures, buy some cheap out of the money calls to back it up. If you can sell the cattle, sell the cattle, buy some calls. Or at least spend the money and buy some puts.

Pearson: Alright. Our next question is from Craig in Iowa. And Craig wants to know, he says, the corn market doesn't know what it wants to do. You talked about the 20 cent range we've been in for seven months now. He's asking, is this pattern going to continue well into summer?

Gold: Boy I hope not. We really love the volatility, we like taking advantage of market movements either way, up or down, and protecting our clients and the market moves down, we can take money out of puts, the market moves up, we can sell cash. We love the movement, particularly at these low prices. If we were at $8 corn I wouldn't have a problem staying up here. But we're not at $8 corn, we're at $3.70, $3.80 corn and that's an issue out here. I don't see it lasting. We're heading into the summer months. I've always said that since 1973 we've had at least one opportunity to market corn and bean at profitable levels. We've seen that opportunity already in the bean market, we had $10.50 beans out there. But now can we get it in the corn? I believe something is going to happen, whether it is the fund short covering, whether it's some hot, dry weather scare, whatever it's going to be, we're going to have at least one opportunity. Certainly we hope we take it out to the upside. And the market looks like it's trying to form a base. But if we have benign weather, June and July, this market is heading south pretty quick.

Pearson: Given the factors that we've already got plugged into the corn market, we know that exports are starting to slow down, we saw that this week, we are planning on slightly fewer acres, how much farther do you anticipate the corn market has to move to the downside? Basically test those $3.18 lows from '14 or '13, whatever that was.

Gold: I think that's a reasonable target. Again, the funds are long. Are they going to go to 250,000 short contracts? Maybe they do. I don't see it going beyond that. Who is going to push it beyond that, particularly if we get some of this old crop out of the farmer hands and there’s less incentive to push this thing lower. But, again, if we have a great growing season we know how much corn the American farmer can grow, it can be burdensome. I'm hoping something positive happens, particularly on the demand side with the Chinese or somebody else, that will take this market and go with it. On the other side, if we get any kind of a real weather scare, I remember in 1983 we met our stone low on June 29th, the day before the final acreage number at 598.25 in the beans. We rallied $3.50 in the beans in the next six weeks, we rallied the corn $1.50 or $1.80 after being on our lows. That was because it had rained all month of June, stopped raining on July 1st, started to get a little warm and then over the 4th of July weekend it was 100 plus and off to the races we went. So it's not too late by any stretch of the imagination. We're just getting the corn planted let alone in the growing season. So there's a lot of things that can still happen out here. A good friend of mine from Iowa, Dick Heinz, called me and said, don't forget, plant the beans in the mud, the crop is a dud. And there has certainly been a lot of mud out there. So we'll have to see.

Pearson: Alright. Our final question comes from Merrill. And Merrill is on Twitter @Pricehelp. Merrill says, it's a two-part question, so I want to get your take on both. Merrill says, it looks as if the economy may move into a recession. How would that event affect the ag markets? So let's tackle that first half. Do you feel as if we're setting up for a recession?

Gold: I've heard talk of this recession creeping back in, that maybe there's going to be a real estate crash or something else. We're almost at full employment according to the -- even at 4.4 they're considering that full employment considering where we've been out here. So I don't see that as an issue. Interest rates are still low. Real estate price keep moving higher, jumping higher and higher. I don't see any -- inflation is creeping back into the market. There's not a lot of inflation. But when I look at things like cars, rent, houses, groceries, a lot of things are getting more expensive every day and we don't seem to be reflecting that in the inflation numbers. So I think inflation is worse than maybe what the government is telling us out here. So I really don't see a recession. If we did have a recession everybody is going to cut back, that's certainly not good for farming. But I don't see that happening.

Pearson: Alright. Now, our final question comes from a student up at Iowa State University. It comes from Cody. And Cody sent us in a video question. And we'd like to encourage all of you, whether you're at land grant universities, community colleges or high school ag students, we'd encourage you if you've got anything you want to know about the markets or about commodities, get out that phone, shoot a little video and send it to us on Facebook or on Twitter. And if you want to learn more about this series that we're doing you can check out on the MtoM podcast #143. Now, with that, Mark, here is Cody's question to you.

Cody: What are the advantages of using futures?

Gold: Well, short and sweet question.

Pearson: What are the advantages of using futures?

Gold: The advantage of using futures, first of all, I'm not sure if he was saying over options or over something else or whether he was saying not doing anything and then adding futures into it. I'm assuming he's saying, not doing anything and adding futures into a marketing mix. And there is certainly a huge advantage in that. You can lock in prices when you have profitable opportunities. You can lock in using a futures contract to lock in those profits and to know where you stand. Now, granted, it doesn't take into account basis and basis is going to vary widely around the country. But futures have been around over 150 years, they're a very valuable tool if used properly to manage the risk that are in the markets. So certainly you can sit there and hope and pray, whether you're raising livestock or growing grain or producing milk, whatever your commodity is, you can sit there and hope and pray, or you can be proactive. And I think for a young guy in college looking at all the opportunities that are out there, cash sales, futures, options, those kind of things, crop insurance is certainly an important part of it, to look at all those things and to come up with a marketing mix that can help you become a better marketer. So the big advantage in futures is it opens up a whole other world to you to be able to manage risk and I think it's certainly a strong way to start looking at these markets.

Pearson: I agree. I always tell young people, even if you don't ever plan on using futures, even if your dad has never used them, your grandpa never used them, learn about them because it's going to shape the way you view the markets in which you're going to sell your physical livestock and it just makes you that much wiser of a person.

Gold: And I think once you understand them you're going to be more apt to use them. And when used properly with a good risk management program all of these tools can help you do a better job of marketing and we know the American farmer can grow it, the problem has been selling it, and any tool you can put in your tool belt to help you do that I think is a good idea.

Pearson: That's the truth. Well, Mark Gold, thank you so much for taking the time to join us.

Gold: Thanks, Mike. Thank you.

Pearson: Join us again next week when Don Roose will sit across from me at the Market to Market table and we’ll learn how one pork producing family is cultivating fans in Japan. Until then, thanks for watching or listening. I’m Mike Pearson. Have a great week!

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