Pearson: This is the Friday, August 4, 2017 of the Market Plus segment. Joining us now is Mark Gold. Mark, welcome back.

Gold: Thanks, Mike. Nice to be here.

Pearson: We're glad to have you. It is hard to believe that we are coming up on halfway through August.

Gold: Time flies doesn't it?

Pearson: Man, it does. And we're looking at some cooler weather in the forecast and that kind of kicks off our first question here from Josh in Nebraska on Twitter @j0shwendt212. Josh, thank you. He notes, with August upon us and seemingly cooler temps and rains in the forecast, what are your downside projections for new crop beans? You mentioned $8.50 on the program. He also wants to bring out the bull in Mark Gold. What is your upside potential in new crop beans?

Gold: Well, if we could close over $10.50 then I think you've got a quick 50 cents to the upside. So maybe, I hate to say $11, but $10.95 to $10.99, somewhere in that range, I think $11 would be a little bit tough but I think we could get there if we could ever close over that $10.57. There's still a little gap there double top at 47 so that would be obviously an indication that we can move it somewhat higher.

Pearson: But we're still a buck shy of that $10.57.

Gold: We're still a buck shy and these markets can move pretty quickly when they have a reason to. And if we get into harvest and we see that the yields aren't there, we think we're going to increase a little bit in Iowa and Illinois and some of the other areas because of the rains and the cooler temperatures that we've seen, there hasn't been a lot of stress on the crop in the month of August when you can really do some damage. But we still have all the issues up in North Dakota and South Dakota, it's 14% of the beans and we've done some damage up there and we still don't see a lot of rain, the heat has been oppressive and that's going to knock these numbers down. Is it going to knock them down enough? Can we lose two bushels an acre from what is currently looked at, at 47.5 roughly? Can we get it down to 55.5? If we can that would be enough to push us up there. But that's a big if considering the conditions that we're seeing in this first week in August.

Pearson: Now, do you expect to see big revisions to bean yield on the Thursday report?

Gold: Well, I think it will certainly be down. I don't think it will be as dramatic nearly as the corn. I think more important are the total production numbers, we'll see the bigger hit certainly in the corn than the beans. But a lot of that has been built into these prices. We've had a hard break in the corn, funds have come out of 50,000, 60,000 contracts. I'm hoping that $3.75 holds in here and we can get something bullish and then see that rally. If that rallies I think the meal will bounce, that will help the beans and hopefully there's nothing too bearish in the beans that will keep us from moving higher, at least in the short run.

Pearson: And really bearish in the beans, an unchanged yield would be pretty bearish at an August report.

Gold: Oh, it would be very bearish. But I just don't see that happening. Are they going to be anxious to do something with it now? Probably now. It's kind of like changing the corn yield in July. What's the point of that? But I think longer term you've got to look at the bigger picture. Between now and if we do get a hard break after the report, get the funds out, get them a little short, maybe somewhere in that $8.80 level I'd probably take a look at buying something down in that range. But again we have to keep an eye on the weather. If it continues to rain with cool temperatures this bean crop will get bigger.

Pearson: Yeah, get bigger and we'll be testing that $8.50.

Gold: And we have a tendency over the last 10 or 11 years to see the yields increase after the August report. So if we got the rains it wouldn't surprise me if this is another one of those years.

Pearson: Okay. Now we've got another one here from Roger Ediger, he's on Twitter @rogerediger. He notes, as we mentioned on the show, we've seen that huge rally in the wheat markets and he's talking specifically about KC wheat. Will we see another rally and is it all depending on that spring wheat crop?

Gold: Well, I don't think it's all depending on the spring wheat crop because as we said on the show they're really two different crops and it's very hard to get a substitute on spring wheat. However, we've done a pretty good job of getting some of the week longs out of the markets. I think Minneapolis has a chance to rally. We're pretty much done with the harvest across the board here and that harvest pressure hasn't been maybe as great as some people might have thought it was and I think it's an indication that yields came down, acres came down, production came down, carryouts are coming down. So I'm hopeful that we can see a rally but I think corn and beans are going to have to be there kind of supporting it. I don't see an independent rally in Kansas City or Chicago without a big move in Minneapolis or a pretty good size move in the corn market.

Pearson: They're just going to tag along.

Gold: Tag along.

Pearson: Alright. Now, this is kind of an interesting question given the fact that we've seen the Dow touch records again and again, 22,000. We saw a pretty tremendous jobs report come out today, brought the unemployment rate down to 4.3%. Craig in Minnesota wants to know, do you see the Feds raising interest rates any more this year?

Gold: Well, we've got roughly five months. These numbers indicate to me that inflation should be moving up. And if we get it to that 2% level that the Fed has been looking for I think we could see another jump. For whatever reason the inflation numbers as the economy has gotten better we haven't heated up inflation. Part of that is due to the lower crude oil prices, partially. Car prices haven't gone crazy out here. So I think it's a matter of inflation. You would think with this many people working, spending money and things just feeling better out here that you would see that inflation start to creep in. You certainly see it in the housing market. I look at rents in Chicago and I wonder who is paying for this? I mean, a two bedroom in Chicago is $2500, $3500 for a high-end apartment. It's ludicrous. I remember paying $800 or $1000 not that long ago for a nice two-bedroom. So we're certainly seeing it in the real estate market. But some of the household products, household use things, particularly crude oil haven't rallied, that's keeping the inflation numbers down. I don't think it can last. If we start to see it pick up any time in the third or fourth quarter then I think you’re going to see another interest rate increase.

Pearson: Okay. They're past watching employment now given that we're at full employment. It's going to be inflation to drive it now. Okay. Now, another thing, same story, watching that Dow 22,000. Ceroll Gelbvieh wants to know, what would the ramifications be to the grain markets if the Dow Jones tops out and starts to turn lower? What does that do to the money flow in the investing industry.

Gold: Well, certainly there is an awful lot of money in the stock market right now. It has been the place to go. It has been the best returns. And if it should turn, if it's a mild correction, 3% to 5%, wont' really have much impact. If there's something that shakes this market and Lord knows we have a political environment in Washington where things can get shaken and stirred in a hurry, and if there is a big blip in that stock market and people are getting out of equities, the natural place to go is commodities, particularly when we're at $3.70, $3.80 corn, when we're at $9 something beans. Why wouldn't you put it in the commodities? And so I would think that if there is a hard break in the Dow for whatever reason that money is going to come into commodities. We've seen in the last several weeks a big draw down of commodity funds, I think it was a billion six out of the markets. I think that is an indication that there's not a lot of interest in crude, gold, some of the other inflationary things that would move a market higher and the grains themselves, we don't have that big drought bull story out there with the exception of the Dakotas and Montana and part of Nebraska. We have pretty much cured the problem in Illinois and Iowa. So the money has been coming out. That can certainly change if the stock market takes a hit.

Pearson: Okay. Now we do have a question for you from a student at Iowa State University. And we encourage all of you to send in questions via video, particularly if you're a student, we want to know what you want to know. And if you want to learn more about this project check out the Market to Market podcast, the MtoM podcast, excuse me, episode #143. So, Mark, here is our question for you from Iowa State student Mikayla.

Erica: As technologies continues to change and improve how do we see education at the farmer level also impacting agriculture in the future?

Pearson: My apologies, that was from Erica, not Mikayla. So my apologies there, Mark. But she brings up an interesting issue. Farmers have more technology, more access to information than we've ever had before. How has that changed your business in educating producers?

Gold: Well, it's funny, I think you can get too much of a good thing and when you've got so many different sources coming at you with so many opinions of the market it's really hard to sort through the wheat from the chaff out there in a lot of cases. On the educational level, which I think answers her question a little more directly, I believe we're going to start to see more emphasis in the college years on some alternatives in managing risk like options. They've only been around really 25 years or so, still a relatively new tool compared to 150 years of futures. So I think we'll see some of that. The data itself we're going to keep getting more and more data. We talked about this before the show, the data may not be as important as the analysis of the data. So certainly there will be a push at the educational level to turn that data into something meaningful where you plug it in, here's the data, spit me out something that says okay here's what you've got to do. And these kids are so bright today, not only on the technology side but just in terms of things way above my head. But I think they'll be able to translate some of that data into some real use. I think that will be helpful and I think that will start at the university level. They've got the computer power to do that, they've got the educators to do that. So I think combining not only the data but the execution of the data will be big at the university level and I think hopefully they'll take some of that and say, okay, looks like the market can go higher, let's buy some call options, there's some risk in this market, let's buy some puts and use it effectively that way. Don't try to outguess the market. If the computer says this market is going higher, and we've all seen computers say the market is going higher, it isn't time to sell everything and go long futures, it's maybe the time to look at buying some call options and know what your risk is.

Pearson: Exactly. And it's interesting, you make the point options have been around effectively 25 years, so now we're to a period where professors have had the experience to go into the job market, trade options, utilize options in their business and then come into education so they've got real world experience with it that they wouldn't have had 25 years ago.

Gold: Exactly. And we're starting to see some of the different universities I've noticed that over the years some of the guys who were initially against options, a lot of them were convinced that 85% of options expire worthless so why buy them and you should be selling them and now they see what can be done in that we don't know what percent of options have good money in them at some point and guys don't take the money out before it goes worthless and that 85 number I think is going to be a piece of data that loses its impact over time because it just doesn't tell the true picture. But the fact of the matter is educators are starting to be more and more aware of the options, what they can do, what their limitations are, what their benefits are and instead of being closed minded to it where they were 20 and 25 years ago now they're saying there is a definite use for options in these markets.

Pearson: Alright. Well, Mark Gold, thank you so much for your insight, always appreciate it.

Gold: Always nice to be here. Thanks, Mike.

Pearson: Join us again next week when Naomi Blohm will sit across from me at the Market to Market table and we look at how young veterinarians are stepping up in remote regions of rural America. Until then, thanks for watching or listening. I'm Mike Pearson. Have a great week.

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