"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Thursday, December 12, 2013

Corn hit by Ethanol Bill; Grains Lower

The big market mover in the grain complex today was news that a Senate Bill which has a group of Senators pushing it, would do away with the ethanol mandate. That would be a HUGE thing if it were to pass and somehow become law but sadly, I do not think it will.

The farm lobby is strong and has some powerful friends in that same legislative body. Even if they were to fail to stop this bill from moving forward, signing it into law would undoubtedly tick off the environmental greenie crowd and that is a big supporter of the current administration.

Personally I am opposed to the idea of government "mandating" ethanol. If the product is viable in and of itself, and if the public really wanted it, the free market should determine that. I am opposed to the idea of the government FORCING people to use the stuff.

I understand it has been a real boon to growers, among whom I have some friends, but I also have friends who are in the cattle and hog business. While the by-product of ethanol production, DDGS, is certainly a good animal feed product, I believe that this forced usage of nearly 40% of our total corn crop unnecessarily drives feed costs higher for cattlemen, hog producers and poultry growers. That in turn drives the cost of our meat and poultry higher than it would otherwise be.

I do not like the corrosive affects of the stuff anyway. It tears the heck out of gaskets and such in lawnmowers and ATV's. But, like most government mandated anything, it will more than likely take on a form of immortality.

At least for one day however, we can bask in the hope of no more ethanol mandate. Certainly traders in the corn pit, which got rolled on the news, are having the usual knee-jerk response to news of this nature.

IN surveying the commodity sector today, the majority of the individual futures are mostly down. There are some exceptions - cattle are higher drawing some support off the lower corn prices and to a certain extent, so are hogs. Coffee is higher as is crude oil, but the products are weak with heating oil leading declines over gasoline.

Soybeans are sharply lower and wheat continues to work lower in price. Weakness in the grains is always welcome news to most everyone with the exception of the hard-working farmers who labor to put  them on our tables.

Silver is doing its usual thing and swinging all over the place although this time in the downward direction. It cannot seem to stay above $20 for long without attracting a plethora of sellers. Gold has fallen well below the initial chart support between $1250 - $1245. Interestingly enough, the HUI is falling far less than the actual metal. That is most curious and bears watching especially on a day in which we get the IAG news.

Markets very often bottom on bad news so if this is the case, we will hopefully see it. If not, the trend remains lower. Barrick is actually trading higher on the day as I type these comments. Most impressive as it has generated buying as it fell into that price gap from MOnday's trade. Stay tuned on this one... that is no small feat but the day is still not over.


  1. Dan

    Ethanol is also very hard on motorcycle parts and components.
    Enviro foolishness.

    1. Not even Enviro foolishness...It's congressional pork-ing. Net energy gain is marginal or negative when petro-fertilizers and farm machinery added in. Worst of both worlds, neither free market nor environmentally sound. USDA's subsidies go primarily to grains (read corn)--about 1/3 of direct 'aid'.

    2. MDLGTO;

      Yes indeed. I can see ethanol from sugar cane such as Brazil cranks out. That gives you a lot more output versus energy input than corn. Even with that in mind, I would not want to see any government mandate. I trust the market to sort these things out.

  2. that is why in some Midwestern states premium is discount to regular; a very bad joke and thank you Dubya; sparks

  3. Clearly, commodities are getting completely brutalized across the board, so much so that it must start to worry Yellen soon as she's terrified of an acceleration in deflation.

    Deflation in essential items, while we are seeing absolutely eye-popping runaway moves in stocks like Twitter and Facebook.

    I mean really, Twitter goes into a "bear market" post-IPO with a low print of $39, and two weeks later its at $54 and a new high?

    Obviously, that company has absolutely no connection whatsoever with mining, farming, or resource production, LOL!!!

    Might as well embrace our huge luck in having nearly free food for many years to come as these grains prices continue to crater.

  4. Bah...who needs Ag anyway!
    TWTR up 5% today.
    TWTR no cash flow period

    That makes sense...Bernanke hasn't caused any distortions or misallocation of capital at all.
    Wash, rinse and repeat? Try rape, pillage and burn.
    This has absolutely nothing to do with prosperity.

  5. Mark

    Armstrong is warning of a possible cycle inversion again...this means the Dow could go into a nasty decline instead of a prosperity forever increase.
    Here is the problem, Armstrong has been very accurate so far...so...given his latest warnings....sell or hold? Or buy all the way down? you know, kind of like what goldbugs were doing. After all, Armstrong has always said that gold will eventually trade at $5k and Dow at $30k...what's to worry about..right?

  6. So....Dow declining...PM's declining...Gov't bonds no good...commodities declining.

    Start stuffing the mattress? I am open to suggestions at this point, maybe just short everything.

  7. Armstrong has zero credibility. After all, he was locked up for nefarious activities for years, and because of that, he's regarded as a rock star hero.

    Now everyone glams on to him like he's the deliverer of the old testament tablets or something.

    I don't get it.

    1. Mark, here in Sparks I pay $11 lb. choice and $16 prime for my ribeyes, o.j. is not getting cheaper, nor are apples or gasoline at $3.40 ; sure, board prices are unequivocally in downtrends, but at the consumer level, especially for medical and insurance? Not a goddamn chance my friend; sparks

    2. Mark, you have finally said something I agree with.

    3. Steve: Where is Sparks? You're driving me crazy with that signature.

  8. Dan... props to you from KC! Love your blog and follow it consistently, your comments about God and the love for this country have even made it into our family devotions at times. My question is this... What 3-4 mining companies do you feel have made the necessary HARD decisions (controlling expenses and not "gambling" with shareholder $ by not locking in some future profits) and are strategically positioned for the future when/if this ship starts going back up?

  9. Leadfoot;

    Wow - now that is really an honor. Thank you!

    I honestly cannot answer that question for you my friend as I am a commodity futures guy and although I do keep track of what happens in the equity world as part of my overall trading preparation, I am really not that proficient in the analysis of individual stocks.

    What I can tell you is that I would look for all the same things that any astute investor would look for - low debt; good management; good properties in good countries where confiscation is not a risk; low cost of production, etc.

    I am sure that there are guys out here on this board who know more about individual stocks than I do but even at that, always make sure that you read the company prospectus. That is where you will discover the "fine print".

    I guess that is one of the reasons I like commodities over equities - in my view they are ultimately pure plays on the demand/supply fundamentals without having to deal with all those other peripheral, although important factors, that one has to deal with before making a decision as to whether or not to commit one's hard earned wealth.

    I can tell you also, that I would definitely look at the price charts of any stocks out there before I would buy them. You can find out a lot about a company merely by studying its price action, especially by comparing it to its peers within that same industry and seeing how its share performs versus its fellows. You do not want to buy a laggard because it is lagging for a good reason, even if you cannot quite discern why. the bigger money knows the reason!

    Very best of investing success to you. Always monitor your portfolio holdings however because things can change that affect them!

    Merry Christmas

  10. Dan:
    RE "If the product is viable in and of itself, and if the public really wanted it, the free market should determine that." - Amen.
    If we could get the government out of the social engineering by finance business ending all these price supports, marketing orders and fallow fields for pay we would eliminate much distortion of the market and have a far healthier economy.
    The barriers are huge, most every constituency has their own rice bowl to be filled and the green environmental ones are the biggest.
    Keep reminding people of this.

  11. don't forget … he also was the first one to step on the moon , and won seven tours


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