Trade Alert - Bought More Coffee

I picked up another coffee contract yesterday on the pullback - I think this provides a nice buying opportunity.

The Dec contracts are currently trading at 128.85.

Every interview that Jim Rogers gives now, he seems to toss out these three commodities as the current buying opportunities:
* coffee
* cotton
* sugar

I would take a hard look at these if you don't currently have any in your portfolio.

Load Up On Cotton

I just picked up one more cotton contract this morning - this crop is poised perfectly for a big rally quite soon.

Remember that often these four crops share soil:
* wheat
* corn
* soybeans
* cotton

The first 3 are at all-time highs right now. So it's clear that cotton will continue to be neglected further in terms of plantings.

Wheat Being Planted Like Crazy

I will not be long wheat very much longer - farmers are sowing the largest wheat crop in 10 years.

Two Good Jim Rogers Links

He sees 'skyrocketing' prices for commodities (thanks for the link Toby)

An interview with Charlie Rose from You Tube

Weekly Positions Update - 9/23/07

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss	Market Value
01/22/07	Long	1	DEC 08	Cotton			63.00	74.50	$5,750.00
04/16/07	Long	1	DEC 08	Cotton			64.50	74.50	$5,000.00
07/27/07	Long	1	DEC 07	Coffee 'C'			115.30	128.70	$5,025.00
06/19/07	Long	1	DEC 07	Coffee 'C'			120.50	128.70	$3,075.00
03/23/07	Long	1	SEP 08	KC Wheat			502	631	$6,450.00
03/29/07	Long	1	NOV 09	Soybeans			828	890	$3,100.00
08/11/06	Long	1	MAR 08	Sugar #11			14.50	10.10	($4,928.00)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	10.15	$224.00
08/01/07	Long	1	JUL 08	Sugar #11			10.48	10.15	($369.60)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	10.15	($2,161.60)
09/18/07	Long	1	OCT 07	Mini Gold			725.0	735.1	$335.32
09/20/07	Long	2	OCT 07	Mini Gold			733.8	735.1	$86.32
Net Profit/Loss On Open Positions:									$21,586.44

Initial Margin Requirement	$20,575.00
Maintenance Margin Requirement	$14,950.00
Total Equity	$64,625.12
Trading Power	$44,050.12
Margin Call	$0.00

Cashed out: $5,000.00
Total value: $69,625.12

What a week - up nearly 30% since last weekend!!!

Coffee - 'No meaningful moisture seen until month end'

Maybe a buying opportunity in coffee - futures sold off today on profit taking and minor showers passing through Brazil. However, no 'meaningful' moisture is in the 10 day forecast, so the crop will stay dry.

Thanks for the lead on this, Toby.

The Edible Portfolio

Great piece from Agora's Kevin Kerr. He comments on the grains markets, saying that the high prices are going to get even higher, because demand is just plain outpacing supply.

Trade Alert - Bought Even More Gold

Gold hit $733 this morning, a 27 year high.

From Agora's 5 Minute Forecast today:

“This move in gold is very different from the spike of May 2006,” says Adrian Ash of bullionvault.com. “Back then, gold moved higher with stocks and bonds. Now stocks and bonds are slipping back while gold attracts a genuine safe-haven bid from private investors and -- more crucially -- from savers.”

Gold is rising against the euro and the pound, too, not just the dollar, stocks and bonds. “Gold is trading within a few euro cents of a 16-month high against the euro,” Adrian writes, “and it has jumped more than 10% against the pound over the last month."

I purchased 2 more mini-gold contracts 5 minutes ago. We'll see if there's a bit more to squeeze out of this trade now that gold appears to have the momentum.

Date

Position

Qty

Month/Yr

Contract

Strike

Call/Put

Entry Price

Last Price

Profit/Loss

Market Value

09/20/07

Long

2

OCT 07

Mini Gold

733.8

733.8

$0.00

Sugar Jumps - Large Fund Buying

Sugar is up big today - speculation is that a large fund has stepped in and purchased a large amount of contracts.

This buying comes on the heels of our sugar discussion - perhaps a reader of this blog pulled the trigger?

Brazil Dry Spell Driving Coffee

Here's to hoping it stays dry in Brazil - this was a really nice pop. Up nearly 10 cents in the last 2 days.

And this guy likes the technical outlook for coffee over the next couple of days.

Trade Alert - Bought More Gold

Hey why not - I could see it trending up over the next few days. I'll ride the train until it starts to slow down.

Here are all the contracts I have - at least they are all 'mini' contracts. I feel like a diet soda drinker - should have just bought the real thing:

09/17/07	Long	2	OCT 07	Mini Gold			719.4	725.0	$371.84
09/17/07	Long	1	OCT 07	Mini Gold			719.5	725.0	$182.60
09/18/07	Long	2	OCT 07	Mini Gold			725.0	725.0	$0.00

Bernanke Has No Onions

And gold shot up quickly as a result. I'm planning to hold these contracts for a couple of days and see where the action goes.

Paul Volcker must be spinning in his grave.

Date

Position

Qty

Month/Yr

Contract

Strike

Call/Put

Entry Price

Last Price

Profit/Loss

Market Value

09/17/07	Long	2	OCT 07	Mini Gold			719.4	725.3	$391.76
09/17/07	Long	1	OCT 07	Mini Gold			719.5	725.3	$192.56

Trade Alert - Bought Gold

I rarely do this - so we'll see how it works out - but I bought 3 Mini Gold contracts this afternoon. I believe the Fed will cut rates tomorrow - by 0.50% I think, and the dollar will get taken to the woodshed.

This is a short-term trade, and I plan to be out of it by the end of the week.

Date

Position

Qty

Month/Yr

Contract

Strike

Call/Put

Entry Price

Last Price

Profit/Loss

Market Value

09/17/07	Long	2	OCT 07	Mini Gold			719.4	717.0	($159.36)
09/17/07	Long	1	OCT 07	Mini Gold			719.5	717.0	($83.00)

Coffee Up Big Today

Coffee futures are up big so far today - my Dec contracts are up 6 points already.

From what I can gather, this is due to an anticipated bum harvest in Vietnam's Robuta beans.

The Sugar Chronicles

With sugar prices back in the tank, farmers appear to be looking to other crops. Here is a sample of articles I found as supporting evidence.

As a result, I believe supply numbers may disappoint over the next couple of years - which could trigger another price run-up. That would make this an attractive time and entry price for '08 and '09 sugar contracts.

Low prices force cane farmers to diversify
Fiji Times - Dark days ahead for sugar cane farmers

However, some analysts are predicting further losses in the weeks to come:
Sugar supply gut

When prices hit $.20/lb in Feb '06, a 25 year high, India and Brazil cranked up production, leading to the current supply glut.
Brazil mergers to come?

International Sugar Organization (ISO) rep says oversupply will probably persist until 2009.

India's millions of sugar farmers "are in crisis" - this tells me that when this oversupply is corrected, we'll see a sharp bull market.

My $0.02 - normally I would be scared away by this oversupply, and I would be content to sit on the sidelines for a year or two. However, I have a feeling that $80 oil is the wildcard here - it has never been more attractive to turn sugar into ethanol, as the price disparity between oil and sugar has never been greater. That may provide a cure for the glut.

India Expected to Top Brazil as Top Sugar Producer

MUMBAI: Sugar futures fell on Wednesday as deliveries started arriving at warehouses ahead of next week's near-month contract expiry, and weighed down by a bumper crop in the offing.

The International Sugar Organisation said in its monthly report on Tuesday it expected India to overtake Brazil as world's top sugar producer with an estimated 33.5 million tonnes of sugar in 2007/08, up from 29 million tonnes a year earlier.

Full article

Weekly Positions Update - 9/16/07

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss	Market Value
01/22/07	Long	1	DEC 08	Cotton			63.00	72.50	$4,750.00
04/16/07	Long	1	DEC 08	Cotton			64.50	72.50	$4,000.00
07/27/07	Long	1	DEC 07	Coffee 'C'			115.30	121.40	$2,287.50
06/19/07	Long	1	DEC 07	Coffee 'C'			120.50	121.40	$337.50
03/23/07	Long	1	SEP 08	KC Wheat			502	596	$4,700.00
03/29/07	Long	1	NOV 09	Soybeans			828	868	$2,000.00
08/11/06	Long	1	MAR 08	Sugar #11			14.50	9.67	($5,409.60)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	9.82	($515.20)
08/01/07	Long	1	JUL 08	Sugar #11			10.48	9.82	($739.20)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	9.82	($2,531.20)
Net Profit/Loss On Open Positions:									$8,879.80

Initial Margin Requirement	$16,880.00
Maintenance Margin Requirement	$12,250.00
Total Equity	$50,710.79
Trading Power	$33,830.79
Margin Call	$0.00

Cashed out: $5,000.00
Total value: $55,710.79

What's Next for Gold?

From James Turk, founder of GoldMoney.com:

The above chart is presenting a very bullish picture for gold. My upside target for gold this year has been $800. To be honest, I thought we would be there by now, but we're not thanks to central banks as explained above. But we have reached a state in the gold market that central banks cannot restrain gold at these relatively low price levels. So I still expect to see $800 this year.

Nat Gas Looks Good Long Term

From Agora's 5 Min Forecast:

“The price of natural gas continues to wallow around and not do much,” Chris Mayer tells his Capital & Crisis readers, “but there are two long-term, seemingly relentless natural gas trends that bode well for those invested in the industry.

Price movement like this is making many natgas stocks “move around sluggishly like fat dogs in the noonday sun.”

“The first is the decline in productivity per well. In 1999, productivity per well was nearly 4 billion cubic feet of gas. Today, that productivity is about only 1 billion cubic feet per gas well -- a 75% decline (according to the EIA and Baker Hughes).

“Second, drilling intensity is rising. In 1999, total wells drilled every month couldn't top 400. That figure was over 1,500 last year -- yet domestic natural gas production did not increase. It seems clear the natgas industry is running on a treadmill that's getting faster. New natural gas is getting more expensive and harder to find. This is good for drillers, as well as companies loaded with proven reserves and that have the ability to grow production. The demand for natural gas should also intensify the search for new wells.”

Weekly Positions Update - 9/09/07

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss	Market Value
01/22/07	Long	1	DEC 08	Cotton			63.00	68.80	$2,900.00
04/16/07	Long	1	DEC 08	Cotton			64.50	68.80	$2,150.00
07/27/07	Long	1	DEC 07	Coffee 'C'			115.30	116.65	$506.25
06/19/07	Long	1	DEC 07	Coffee 'C'			120.50	116.65	($1,443.75)
03/23/07	Long	1	SEP 08	KC Wheat			502	600	$4,900.00
03/29/07	Long	1	NOV 09	Soybeans			828	875	$2,350.00
08/11/06	Long	1	MAR 08	Sugar #11			14.50	9.73	($5,342.40)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	9.88	($380.80)
08/01/07	Long	1	JUL 08	Sugar #11			10.48	9.88	($672.00)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	9.88	($2,464.00)
Net Profit/Loss On Open Positions:									$2,503.30

Current Cash Balance	$41,830.99
Open Trade Equity	$2,503.30
Total Equity	$44,334.29
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$44,334.29

Cashed out: $5,000.00
Total value: $49,334.29

Gold Rallies to 4 Month High Above $700

I am not normally a huge gold bug. I do not own any gold in my futures account, but about a month ago I purchased the ETF GLD for my ROTH IRA. I may be a bit 'old school', but watching the Fed try to 'liquidate' its way out of the credit crunch really turned my stomach. And the Bush housing bailout is even worse. What ever happened to capitalism?

I feel like there must be ramifications for the 'Bush/Bernanke put'. However, the supply/demand case for gold is not compelling compared with most of the other commodities. There is plenty of gold being mined. If you buy gold, you are betting on the failure of fiat currencies, buying some piece of mind, etc.

Because it is a commodity, I'll cover it briefly from time to time. But I do not plan to buy any gold contracts in the near future - I'll stick to simple supply/demand.

Gold rallies through 700 (Forbes)

Trade Alert - Sold 2 Wheat Contracts

Ticket #	Reference #	Time Entered	Status
7341103		09/06/07 07:29:08PM	FILLED
SELL 1 JULY 2008 WHEAT (ECBOT) MARKET
SOLD 1 JULY 2008 WHEAT (ECBOT) AT 601 (09/06/07 07:29:08PM)
7332781		09/05/07 06:07:23PM	FILLED
SELL 1 JULY 2008 WHEAT (ECBOT) MARKET
SOLD 1 JULY 2008 WHEAT (ECBOT) AT 615 1/4 (09/05/07 06:07:22PM)

Gasoline Supplies - Lowest Level Since 1991

From Agora's 5 Min. Forecast:

Gasoline supplies are at their lowest level since 1991. Measured in “days of gas available,” the Energy Department reported that, for the last week data were available, the U.S. has only a 20-day supply… the lowest since the first Iraq war.

Yet despite these supply levels, gas prices remained at a nationwide average of about $2.80 all last month. With the summer driving season drawing to a close, we might see lower prices still.

WSJ - Wheat's Surge to Pinch Wallets

From the WSJ:
Full article (subscription required)

Food Prices Face
Increasing Pressure
As Futures Hit High

By TOM POLANSEK
September 5, 2007; Page C8

CHICAGO -- Consumers in the coming months will have to pony up a little more money at the grocery store for flour, bread and other baked goods as record wheat futures prices are driving up food costs, analysts said.

Wheat futures have soared this summer amid serious crop losses in key growing areas of the Northern Hemisphere, including Europe and the Black Sea region. Dryness in Australia also threatens to slash production Down Under for the second year in a row.

Trader anxiety over shrinking world supplies lifted nearby-month Chicago Board of Trade wheat futures to a record of $8.10 per bushel, exceeding the previous high of $8.05 set Friday. The contract settled at $8.07, up 40 cents. A year ago, it traded at $4.04.

Full article (subscription required)

Sugar Has Never Been This Cheap Relative to Crude Oil

From Bloomberg News: Farm commodities are the new stars

According to the article:

• Sugar has never been this cheap relative to crude oil.
• Jim Rogers, my hero, does not see the credit crunch affecting the soft commodities. "There are three billion people in Asia who were not involved the last time we had a commodities rally and aren't going to lose their appetite because of problems in the U.S."
• Marc Faber, analyst and investor, said prices of agricultural commodities were "still extremely low" in real terms and "look relatively attractive" because of potential weather disruptions.

I am thinking it's time to pick up some more sugar contracts. I sold near the last relative peak, but them mistimed by re-entry and continued to buy on the way down. But hey - while prices could go lower, they are cheap right now. I didn't think we would see sugar prices under 10 cents this soon.

And if you're the hedging type - pick up a few sugar contracts and short crude oil. They can both be used for fuel, after all.

Russia May Ban Wheat Exports

From Agora's 5 Minute Update:

Among other things, Kevin (Kerr) will be commenting in Milan on the fact that Russia -- the world’s fifth largest wheat exporter -- is considering banning the sale of wheat to foreign nations. Moscow officials are concerned about wheat’s skyrocketing price and its effect on the Russian consumer… especially on the eve of national elections.

“The announcement that the Kremlin is considering a ban on exports is absolutely one of the most bullish pieces of news we’ve heard for wheat in a while,” Kevin wrote to us. Wheat is currently priced at $8.06 per bushel. "Given this news, $9 a bushel is a real possibility,” says Kevin. ”Export inspections are running very high and demand is huge.”

Wheat Crosses 800 Cents

I feel like a broken record - but this is one helluva ride! Wheat futures crossed the 800 cents mark this morning.
Chart

There are ongoing harvest problems contributing to the situation. Remember that wheat inventories are already at a 26-year low, so there is no slack in the system.

How high can prices go? Honestly I have no idea. I am not a buyer at these prices - things are just too crazy. I'm content to fasten my seatbelt and hang on for the ride.

As commodity investors (as opposed to traders), we need to keep things in perspective. Short term, I'm not sure where prices are heading (though I'd love to hear input from chart readers - Toby, any thoughts?)

I do know that next year, more wheat will be planted than has been planted in awhile. Where will the acreage come from? Corn, soybeans, and cotton. The cheapest crop will probably get shafted the most - and that looks like cotton at the moment.