Agora's Kevin Kerr still likes corn in '08

From Agora's 5 Min Forecast - Kerr sees corn north of $7 in '08. I know, yet another post about plantings behind schedule.

Also worth noting - as long as I've been following Kerr (~3 years), his calls on corn prices have been spot-on.

Corn futures, on the other hand, are still on the rise. Now over $6 a bushel, corn is just a breath away from passing its record high from a few weeks ago.

Corn’s trip to $6 comes on the heels of the latest USDA planting progress report. According to the government, U.S. corn farmers have planted 10% of their 2008 corn crop as of this week… far behind the five-year average of 35% and trade estimates of 15-19%.

Kevin Kerr left the Midwest with the impression the median price for corn in 2008 would be $7.50… a buck fifty higher than today.

Where's the Beef?

Whoa, how'd I miss the recent rally in live cattle? It make so much sense fundamentally - Asia eating more meat, high grain prices putting the squeeze on meet production, etc...I just fell asleep at the wheel a bit here.
Here's an article I found on BarChart regarding the livestock markets.

I also read over the weekend that Doug Casey has been buying up some meat contracts, on the logic that high grain prices will eventually equate to high grain prices. Is it time for us to pull the trigger as well here?

Weekly Positions Update - 4/27/08

Open Positions

Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss 04/15/08 Long 2 JUL 08 Corn 605 589 ($1,600.00) 04/17/08 Long 1 JUL 08 Cocoa 2735 2777 $420.00 04/15/08 Long 3 JUL 08 Rough Rice 21.745 24.180 $14,610.00 04/15/08 Long 1 JUL 08 Sugar #11 13.26 12.23 ($1,153.60) Net Profit/Loss On Open Positions: $12,276.40

Account Balances
Current Cash Balance	$97,326.79
Open Trade Equity	$12,276.40
Total Equity	$109,603.19
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$109,603.19

Cashed out: $10,000.00
Total value: $119,603.19

Weekly return: -3.6%
YTD return: 53.8%

***BTW, I usually "cash out" money just to pay taxes. So total value is all pre-tax. Going forward, I'll be cashing out to pay the rent also - no slack in the system for hookers and booze, that will have to wait for later in the commodity bull :)

Rice Resilient

Maybe it's not time to quit on Rice yet!



Sorry - wrong rice :)

Close call for me - I had my stop down at 23.50. I was sure I was going to be stopped out, and am glad I hung on and waited to "take it like a man", rather than just selling around 23.70 (which I thought about).

After watching this market non-stop for the last two months or so, I definitely find today's rally (pleasantly) surprising. Lately rice has been stronger trading in the Asia sessions than the US - so I figured a down night in Asia last night would be the end of the line.

Stay tuned - we'll check back in on this one Sunday evening!

FT.com: Is the Yen still a Japense Currency?

David Bloom makes the case that the Japanese Yen is no longer trading based on Japanese events.

From personal observation - I agree, the Yen has been basically an inverse proxy of risk appetite in America for the past year or so.

The Gart-man Exits Gold Also

From Marketwatch:

Dennis Gartman, editor of daily financial trading commentary The Gartman Letter, said Monday that he's abandoning his long-held bullish outlook on gold.

Gartman said that "good bull markets" don't fall in the way that gold and other metals fell on Friday, when the precious metal tumbled $27.70.

Gold "has broken this well-defined bullish trend line and it failed miserably on Friday," Gartman wrote. "It has bounced today [Monday], and we shall sell that bounce and exit entirely!"

Good Midwest Weather Sends Corn Down

Ah the joys of trading agriculture :)

Dow Jones - CBOT corn futures are firmly planted in negative territory, as the market extracts weather premium from prices, analysts say.

Money Morning: Food Prices Soar as Farmers Bail on Corn

Full article

Weekly Positions Update - 04/20/08

And a very happy 420 day to all our friends out there who enjoy puffing the reefer from time to time. Any threat of "Peak Pot" on the horizon, or has it been spared from the biofuels fiasco?

Open Positions

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss
04/15/08	Long	2	JUL 08	Corn			605	612 3/4	$775.00
04/17/08	Long	1	JUL 08	Cocoa			2735	2661	($740.00)
04/15/08	Long	1	JUL 08	Cotton			78.77	74.90	($1,935.00)
04/17/08	Long	1	JUL 08	Coffee 'C'			142.00	136.95	($1,893.75)
04/15/08	Long	3	JUL 08	Rough Rice			21.745	24.070	$13,950.00
04/15/08	Long	1	JUL 08	Sugar #11			13.26	13.29	$33.60
Net Profit/Loss On Open Positions:									$10,189.85

Account Balances
Current Cash Balance	$103,507.58
Open Trade Equity	$10,189.85
Total Equity	$113,697.43
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$113,697.43

Cashed out: $10,000.00
Total value: $123,697.43

Weekly return: 12.4%
YTD return: 59.3%

***BTW, I usually "cash out" money just to pay taxes. So total value is all pre-tax. Going forward, I'll be cashing out to pay the rent also - no slack in the system for hookers and booze, that will have to wait for later in the commodity bull :)

Sacramento Bee: Panic over rice prices hits home in capital

Well, when it hits the front page of your local newspaper, it's probably time to sell. It will be interesting to see where prices go this week. For now, the line is still going from the "lower left to the upper right", as Dennis Gartman likes to say.

Sacramento Bee: Panic over rice prices hits home in capital

If it asks for registration, try one of these logins.

New Gov't Solution for Food and Energy Crisis

Shout out to my buddy Chihab for finding this gem.

Australian rice farmers switching to growing wine grapes

Another good one from Agora - courtesy of their 5 Minute Forecast (if you couldn't tell, I read this publication religiously):

On the other side of the world, extreme drought and telling profit margins have Australian rice farmers switching to growing wine grapes. Australian rice? Yeah, that’s what we thought, too. But the reduction in rice imports from Australia has helped add pressure to an already strained global market for the little white grains.

A multiyear drought has crushed the Australian rice industry. According to The New York Times this morning, the Aussie rice crop has been decimated… down 98% over the past six years.

As the weather worsens, Australian farmers have taken to growing wine grapes -- not because the grapes command higher selling prices, but because the water required to grow rice is too expensive.

Regardless what you think of their politics, The N.Y. Times makes great charts. We nicked this one for you this morning:

Money Supply vs. Oil

Hat tip to our buddies at Agora

What's Moving Now

I just picked up a Cocoa contract. I had been eying cocoa for about a week, but wanted enough validation to pull the trigger. Of course now I wish I had pulled it sooner - but that's the way it works.

Check out the cocoa chart here - very strong rally following up from the recent nasty correction. I haven't been able to find much news, other than funds buying (surprise, surprise) and a lack of sellers (gee, thanks). Though the lack of sellers is a bit interesting - perhaps all the weak longs were shaken by the recent correction.

Rough rice also appears to be in runaway mode - supply concerns are driving this. Nice quote from this article:

"There's been a popular misconception that the world can produce as much food as it likes. Well, it obviously can't. And Asia can't feed itself at the moment," Gerry Lawson, chairman of major Australian rice producer Sunrice, told Reuters.

That sums up the bull market in agriculture pretty nicely. If rice keeps running away, I may start walking around town wearing this man's jersey:


Corn - both technically and fundamentally - looks poised to continue its steady climb up. There is not a lot of room for error with this year's corn crop, considering so much is already "earmarked" (hardy har har) for ethanol.

And coffee's looking hot also, as news about disappointing Brazil exports, combined with the ever weakening dollar, has folks piling back into coffee contracts. Aw heck, I might have to pick up one of these contracts after I finish writing this post :)

Another Record High for Rice

Courtesy of Agora's 5 Min Forecast:

Headlining the global food crisis, rice found itself another record high yesterday.

Futures in Chicago ticked up another 2.3%, to $22.67, per 100 pounds when the Philippines -- the world’s biggest rice importer -- put in a buy order for 1 million metric tons. That’s more than 50% of all the Philippine rice imports in 2007… clearly, the government is concerned about food supplies.

According to the USDA yesterday, only 2% of the Arkansas rice crop is in the ground. Arkansas, the biggest rice state in the U.S., had planted 31% of its crop this time last year. As Kevin reported yesterday about corn crops this year… too wet, too cold to plant.

Slow Planting Pace for Corn

The U.S. corn crop was 2% planted as of Sunday, down from the five-year average pace of 7%, the U.S. Agriculture Department reported Monday afternoon in its weekly Crop Progress report.

Daily Pfennig: Blue Light Specials on Yen, Swiss Franc

Currency guru Chuck Butler at the Daily Pfennig has been waiving the flag for the Swissie and Yen for some time, long before their recent moves up.

He loves them at today's prices:

Swiss francs are back to parity with the dollar, and even beyond! Japanese yen is flirting with a sub-100 figure too! I believe the term, "blue light specials" was used by someone (me!) a couple of weeks ago describing the cheaper levels to buy these currencies... I love it when a plan comes together!

Kevin Kerr Video on MarketWatch

Link to video

He thinks:

• Oil may be due for a pullback
• Low carryover stocks for soybeans

Washington Times: Global food riots turn deadly

Full article

Top 10 Ethanol Producing Nations

Weekly Positions Update - 04/13/08

I'm sorry for the lack of posts the past week - it was a really crazy week. I'm involved with a startup and we had a big pitch to give on Thursday, so the week just flew by. I caught up on the commodity news yesterday, and have a few things to post later this evening.

On a personal note, I recently left my job (this is a very good thing) - so for your added entertainment, my futures account will also serve as my sole source of income for the time being, as soon as I run through my relatively meager savings. C'mon grains - Daddy needs a new pair of shoes!!!

Hopefully the added pressure won't mess me up - I realize I need to be a bit more conservative with the leverage, as I really can't afford a large draw down. Of course this would be a great time to get the follow up sugar rally we've all been waiting for :)

Open Positions

Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss 03/31/08 Long 1 MAY 08 Corn 576 3/4 584 1/2 $387.50 04/02/08 Long 1 MAY 08 Corn 598 1/2 584 1/2 ($700.00) 04/10/08 Long 1 MAY 08 Cotton 74.97 74.20 ($385.00) 03/13/08 Long 1 JUN 08 Japanese Yen 0.9992 0.9898 ($1,175.00) 03/12/08 Long 1 MAY 08 Rough Rice 18.980 20.920 $3,880.00 03/13/08 Long 1 MAY 08 Rough Rice 19.500 20.920 $2,840.00 04/08/08 Long 1 MAY 08 Rough Rice 21.170 20.920 ($500.00) 03/25/08 Long 1 MAY 08 Sugar #11 12.15 12.40 $280.00 03/17/08 Long 1 JUN 08 Swiss Franc 1.028000 0.9929 ($4,387.50) Net Profit/Loss On Open Positions: $240.00

Account Balances
Current Cash Balance	$100,956.56
Open Trade Equity	$240.00
Total Equity	$101,196.56
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$101,196.56

Cashed out: $10,000.00
Total value: $111,196.56

Weekly return: 0.2%
YTD return: 42.6%

***BTW, I usually "cash out" money just to pay taxes. So total value is all pre-tax. Going forward, I'll be cashing out to pay the rent also - no slack in the system for hookers and booze, that will have to wait for later in the commodity bull :)

Weekly Positions Update - 04/06/08

Open Positions

Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss 03/31/08 Long 1 MAY 08 Corn 576 3/4 593 $812.50 04/02/08 Long 1 MAY 08 Corn 598 1/2 593 ($275.00) 03/13/08 Long 1 JUN 08 Japanese Yen 0.9992 0.9879 ($1,412.50) 03/12/08 Long 1 MAY 08 Rough Rice 18.980 20.680 $3,400.00 03/13/08 Long 1 MAY 08 Rough Rice 19.500 20.680 $2,360.00 03/25/08 Long 1 MAY 08 Sugar #11 12.15 11.60 ($616.00) 03/17/08 Long 1 JUN 08 Swiss Franc 1.028000 0.9942 ($4,225.00) Net Profit/Loss On Open Positions: $44.00

Account Balances
Current Cash Balance	$100,987.25
Open Trade Equity	$44.00
Total Equity	$101,031.25
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$101,031.25

Cashed out: $10,000.00
Total value: $111,031.25

Weekly return: -1.3%
YTD return: 42.3%

***BTW, I usually "cash out" money just to pay taxes. So total value is all pre-tax.

Ag Play in the Stock World

Hat tip to Daily Wealth for this chart on Potash (scan to the end of the article).

Potash should just keep on humming along for the forseeable future - we've posted about them before here, and I don't see an end to this trend.

Chuck Butler on the Swiss Franc

Chuck Butler on the Swiss Franc and potential end of the carry trade, from his must-read currency newsletter, the Daily Pfennig:

Swiss inflation is really putting the pressure on the Swiss National Bank (SNB) to raise interest rates... Inflation in Switzerland accelerated faster than expected in March. In fact, it was the fastest monthly pace in 14 years! OK, get ready for this... Because from that introduction, you would think inflation was out of control here, right? Well... Inflation rose to 2.6%... Nonetheless, this is higher than the SNB's target of 2%... So... Hopefully the SNB will not rely strictly on the stronger franc to combat this rise in inflation... A rate hike in Switzerland could all but end the short selling in francs...

Why you ask? Ahhh grasshopper, sit... You, see... When a low yielding currency is used as the funding currency of the Carry Trade, it is sold "short", and the proceeds are used to purchase a higher yielding currency... Since the "short" currency's yields are low, the borrowing costs are low too... (when you sell short, someone has to lend it to you to sell, thus you are borrowing the currency)... But if the borrowing costs begin rise, that causes the trade to lose... And who wants a "losing" trade?

So... Grasshopper... If Switzerland's interest rates would go higher, their borrowing costs would go higher. This would cause the Carry Trades using Swiss francs as a funding currency to unwind, which means the "short" would get covered, and to cover a short... You BUY the currency! Thus driving the price of Swiss francs higher! YAHOO! That's it... That's all there is!

Kevin Kerr: Corn Crop in Trouble

From Agora's 5 Minute Forecast:

“This cold, wet start to April,” explains Kevin Kerr, “means farmers may not get corn into the ground before May 1. That is devastating. If cold, wet weather persists in the Corn Belt and farmers don't plant until after May 1 and then, as in '83, we see dry weather come in around June, well, then you can kiss this crop goodbye.”

Even if farmers managed to sow their crops, Kevin tells us that current yields based on planting intentions have no room for error… nothing less than a near perfect harvest will satisfy demand.

“A disaster would take only a nod from Mother Nature. Last year, Australia and China -- maybe this year it's our turn to get spanked. I have decided to head out to see some of my farmer friends in Minnesota and Iowa with my family in a couple weeks. I will keep you posted on how the fields look as I visit each of their farms.”

Daily Wealth: Frank Holmes Expects Copper to Double From Here

Frank (Holmes) expects copper – which has gained 400% in the past five years and now sells for $3.75 per pound – to hit $8 to $10 in the coming years.

Frank is the CEO and chief investment officer of publicly traded U.S. Global Investors, one of the top commodity fund managers in the world.

Full Daily Wealth article

Rude Awakening: "D" is for Demand

Great job by Dan Denning and the Rude Awakening crew on today's article.

They make the case that a steep decline in agriculture is unlikely. Only a decrease in demand would trigger that, and that does not appear likely at this point in time.

AP: Analyst Predicts Corn Rationing in 2008

Shout out to my boy Marcos for forwarding this one along.

A BB&T Capital Markets analyst said Monday corn rationing may be necessary this year, following a U.S. Department of Agriculture report predicting farmers would plant far fewer acres of corn in 2008.

Full article

The Growth Stock Wire: Agriculture Is Entering a Blow-Off Top

Full article