"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


Wednesday, June 11, 2014

USDA Supply-Demand Report Day

USDA released its Supply/Demand numbers this AM. Based on those, they are expecting a record US corn crop of 13.935 billion bushels on a yield of 165.3 bushels/acre. The 2013-2014 ending stocks are expected at 1.146 billion bushels, down from their last estimate of 1.157 billion. The 2014-2015 carryover is expected to total 1.726 billion bushels.

Soybean production should total 3.635 billion bushels this year using a 45.2 bushel/acre yield. Analysts had been looking for  a 3.267 billion bushel crop using a yield of 45.0 bushels. Carryover is expected to jump significantly to 325 million bushels, up from the current marketing year's 125 million bushels. USDA once again lowered those ending stocks in the beans which has been the wild card that is keeping this market trading in such a schizophrenic fashion. Traders are simpy unsure of how to deal with such a tight carryover in the face of a huge new season crop. The spread action is resulting in contortions and erratic swings in price.

USDA also raised global bean production to 299.99 million metric tons. That is up from the current marketing year's 283.79mmt. Brazil registered  an increase of 2.5mmt to 91mmt.

USDA lowered total global wheat production to 701.62 million metric tons. They did however raise total global wheat stocks to 188.61 million metric tons up from their last month's 187.42 million metric ton forecast.

On the domestic front, USDA pegged total wheat production to 1,942 billion bushels which was actually well below analyst's average of 1.959 billion. However they raised both the 2013-2014 and the 2014-2015 ending stocks for wheat. The current marketing year jumped 10 million bushels to 593 million from last month's 583 million. Next year's carryover is expected to be 574 million bushels, up from May's projection of 540 million bushels. Wheat was hit hard on this data especially KC wheat.

All in all, other than the tight soybean carryover for the current marketing year, one would be hard-pressed to find anything friendly in any of these reports. It is however good news for consumers and for the livestock and poultry industries.

Hog producers out there, take advantage of the rally in the 4th quarter hogs/early Q1 2015 hogs and the sell off in corn and beans to continue locking in some expected production and securing some feed coverage when you do. You will guarantee yourself some outstanding profits and be able to sleep quite well at night. Your margins are outstanding right now so do not let them slip away from you. Scale into those hedges and leave out no more than 25-35% for gambling purposes. Any sort of unexpected bearish surprise in this month's Quarterly Hogs and Pigs report will have you kicking yourself in the rear end repeatedly. You can always leave your upside open with some well-managed option plays such as bull call spreads if you want to do some speculation but do not forget that you are a producer, and not a speculator.

Gold was supported in the overnight session on news that the World Bank cut its global economic growth forecast to 2.8% for the year. That is down from their January forecast of 3.2%. The Bank blamed emerging market countries for their unwillingness to deal with counterproductive policies. The report also mentioned concerns about China's housing market. Gold seemed to draw some safe haven buying on that news which continued into the Western session trading.

The Gold Volatility Index actually fell lower making yet another multi-month low. It sure does appear as if gold has entered its "summer doldrums".  

That general "safe haven" theme could be seen in the stronger Yen once again ( the idea that the Yen is a safe haven is laughable but the markets have transformed the currency into a safe haven for some reason). Also, bonds ticked higher on the news with the result that interest rates dropped lower. US stock markets moved lower on that news and have also remained lower as I type these comments. "Caution" is the theme of today.

It is interesting to note that copper was weak on the news but that silver decided to move with gold instead of the red metal.

Once again Crude oil is back to throwing off mixed messages about the state of the US economy when compared to copper. US EIA data showed a 2.6 million barrel drop in oil inventories. Someone is using the stuff and keeping this market supported. If the economy was completely in the tank as some are suggesting, we would not be seeing crude oil prices staying this well supported. I am keeping a close eye on that $105 level. It has thus far been acting as an overhead cap but if it goes, $108 comes into play.

The miners ticked higher today with the HUI inching towards overhead chart resistance beginning near 215.50 and extending to 220. It looks like it is setting up a range trade for now.

I am, however noting that as the session is wearing on, gold and the miners are surrendering some of their gains. Both remain in the black at the moment but they have certainly faded from their session-best levels.

The US Dollar, as viewed through the prism of the USDX, once again made a try at the 81 level but could not clear it. It has been in a slow, grinding-like trend higher but really needs to push past that 81 level to make a run at heavier resistance near 81.45 - 81.50. It has managed to best its initial resistance level near 80.70-80.80 and so far is holding above there. I do believe that if the greenback can clear 81.50, gold will not hold at $1240. We'll see. Just an opinion and we all know here what opinions about markets are worth. Price action is the ultimate arbiter.

Further along the currency front, the Euro is continually its descent towards chart support near the 1.350 region. That support extends down to 1.348 or so. I should note here that there is some chatter about the Euro being used a "funding currency" ( aka - carry trade) in regards to other European currencies.


  1. Last week Edelson ( Real Wealth Report published by Weiss Co) Issued BUY on IAG followed two days later by Cramer's TheStreet.com. Stock is by 25%+. ( Full disclosure I bought some at $3.25 and will ride it for a buck;
    this is NOT called Investing, but " riding the HYPE ".)

    Which mining stock could be next? Could it be SA ?
    Weiss Asset Mgmt owns 1.2M shares at avg price around $7+ at end of Q1 2014

    Weiss Asset Management LP 1,200,000 2.55% $8,496,000 Mar 31, 2014

    ( No guarantees from management here ; I figure this is a blog for traders and speculators ? )

    1. Its called pumping stocks. Jim likes to think of it as "sheering sheep that deeply enjoy their haircuts."

      Trx not ready yet but not because of lack of effort.

      I can only hope jim enjoys his business class ticket and first class hotel stop over in dubai in his way to his grandchilden from his on the payroll sun in law in tanz.

      Because he certainly is not going to conduct any business deals on this trip.

      2.10 tops, Luis / Jim.

    2. Larry put a buy on SA last time it went from 8 to 16, only to end up at 6 several months later. He also had subscribers going aggresive short on the gold double bottom in December. I'd be careful of him.

    3. Larry should start an extended family, hes got talent.


    4. 2.05 fantastic painjob for the close, Luis.

      MM surely is a better business then the hotel business.

    5. This comment has been removed by the author.

    6. Hey Jasper you really seem to have been shafted , I am sorry for that man . Who is Luis anyway ?

  2. Good thoughts and observations as usual Dan. I would guess that we need to very closely watch the Iraq/Energy situation for the most important geopolitical potential fiasco. Seems like Ukraine is now on page 17.

    Hubert, good timing again. And Mark, you may want to check out ZH, who every now and then has a decent post. This time it comes from some new kid that I have not seen before.....Stalingradandpoorski is his moniker and I think he makes legitimate and salient points. We all know that ALL trends end, just like ALL hot crap tables go cold. Anyway, give it a read, and as old Satchel Paige used to say, "Don't look back because somebody might be after you". Or something like that; swb

  3. I believe that quote was "Don't look back, something may be gaining on you."

    1. Bobbo, you are a better man than me on the quote; I stand corrected

  4. NUGT is up 13% over the last 5 days!!!!

    Something is going on! If we had listened to Mark we would have been shorting gold this week. Time to change the record. It could be we will see a good rally in September.

    It is all very well having a go at the permanent gold bulls, but the other side is just as bad.

    1. You found a triple long gamble up 13 percent in a week and think something is going in?

      Last week this day was the day mark was giving the thought of a rip your face off bearmarket rally some consideration.

      This was it!


    2. I did not find it I was invested in it as it had bottomed at 28 and seemed like a great bet despite the negative comments by a few on here, You are just as bad as the Gold pushers. Just trade the market as you see it and put aside your bile and you will see the world in a much better light :-)

      There is no doubt that many have lost money on PMs, but they should not have gone all in, which is just plain stupid, but this constant attacking of gold by a few on this website is embarrassing and puerile. (not Dan by the way who gives the facts).

      Gold will no doubt have its day again and should be part of most investment portfolios, so to dismiss it as some sort of disease or mental illness is ridiculous.

      Lets see what happens in the next 6 months!!

    3. This is what Mark actually posted.

      Well I can tell we are far from a bottom.

      KWN running yet another "Terrifying Collapse" story by Egon Von Greyerz, a so called 42-year veteran who missed out on the one of the greatest bull markets in U.S. stocks.

      I guess a $100 drop isn't going to do it.

      Maybe a $500 drop in 3 days will get these guys to shut their Pie Holes and maybe re-examine the theories they have been pitching as the Dow has risen 2,200 points from October 2013, the month KWN had no fewer than 8 crash articles posted on their site.


    4. I dont think mark was predicting a drop within three days.

      Look a little further sometime last week mark was entertaining a bearmarket rally. Thats the more relevant post for your 13 percent nugt achievement.

      Lets talk again if and when gold trades below 1000 bucks in a year or two.

      Meanwhile dont take it personal. Only truth is your friend.

    5. David B
      I wouldn't worry about the attack mode on gold by some people on this website, as some do it to get some laughs. Also, it's a good contrarian indicator. Dan and others have attacked the gold sites, and some rightfully so, saying that their are people who have lost everything, but I agree with you, who told these people to put everything into the precious metals. I read many of those gold sites, and hardly anyone ever says to invest everything into gold and silver. As much as I feel sympathy for those who have lost everything, they have to take some responsibility for their actions. As far as the gold juniors, GDXJ is up approx. 8% in the last 2 days on strong volume. It could be a legimate move, or just a head fake, but it feels real to me. I would expect gold & silver to make a big move up in the next day or two, if not, it's probably just a bounce.

    6. 0votes

      "This is it"Submitted by Gil on Sun, 09/20/2009 - 11:00


      Readers of jsmineset.com have been hearing Jim Sinclair say "This Is It" for quite some time now. In this recent post he explains why he has been saying "This Is It". This is not fearmongering, it is reality. An exerpt:

      "I believe it is now too late to do the right thing and therefore the wrong thing will continue to be done, leaving all hopes on a sustainable economic recovery most unlikely for many years to come."


      The above is from ron pauls site. 2009. Lets see about the next day or two.

      The average gold bull thinks the bears and promotor/fraud critics are "just losers". Such people never win.

  5. Dan, about carry trade, I remember the devastation on the polish zloty a few years ago when positions were unloaded (3.20 to 4.80 in a few months Eur/Pln) and the after effects on the population who borrowed massively in Euro or Swiss Francs to buy some real estate because the rates were a bit lower in that currency...boom.
    Today, if you want to participate, in Armenia, you can put your dollars in the bank for one year only and they'll give you a 10% return rate on it.
    I'm not kidding : 10% return rate on the dollar, yearly, and 14% in the local currency.
    Not bad if you trust the banks lol.

  6. Dan,
    You stated that if the $ index pushes through 81.50, you didn't expect gold to hold $1240, and you may be right. The interesting aspect of the gold/dollar inverse relationship, is since Dec. 2004, when the dollar index was approx. 80.70, gold was $400, now the dollar index is basically unchanged and gold is at $1260. My point is you hear many people, especially gold pundits talk about the dollar crashing, and as a result gold going much higher. The dollar doesn't have to crash for this to happen, as it is just one bad currency, rising and falling against the other. Gold will continue to rise against most fiat currencies, as countries continue to debase their money, and most notably Japan, US, and the Eurozone continue to have tremendous debt.

  7. Thanks Dan. Your call a few days ago that gold was done and so was the HUI. I loaded up right away on NUGT and GDXJ. Made a huge pass the last couple days and I'm out. I wait for your next call so I can do the opposite.

    Thanks again

  8. Great posts as always Mr. Norcini.

    David B--I find NUGT & DUST to be fickle mistresses--The spreads widen out of nowhere, like a gaping maw, leaving your stop order to get eaten up by a hungry algo. To scary for me to get in them with large sums or long periods without the parachute that a stop offers. Day trades only.

    Jasper: I'm with you on TRX on fundamental grounds. It has $4-5Million cash in the bank. The company has a mkt cap of $200 million. The 2012 PEA gave the only active project, Buckreef, an NPV5 of $81 million @$1,300 gold + required total cap ex of ~$400 million.Given lower gold prices, the company moved to a low cost, open pit heap leach mine (lower cost method of extraction with the downsides of ~20% lower recovery rates & longer recovery cycles). The company never gave a revised PEA or back of the envelope figures when they moved to the heap leach strategy. The company has not offered a detailed project time line for the new mine (only that, per its April press release, it would be filling the heap leach pad with ore in May-June 2014). I am required to give more detailed project plans as a landscape designer. Comparable Heap Leach projects in Africa are not cheap (Gryphon Gold's project in Burkina Faso has a cap ex price tag of about $100 million not including working capital). So the questions in every investor's mind must be: 1. What is the return on this project using heap leach @ $1250 gold? 2. If the IRR or NPV is attractive (and how does STAMICO's 45% holding get paid out), how will it be financed? 3. If one & two are answered satisfactorily, how will existing shareholders be affected by the massive influx of required capital? It's not reassuring that the company has not given any data to answer these questions. Each investor must do his own due diligence. I own puts on TRX, selling them when the stock hits lows & rolling them over to farthest possible expiration horizon. To me, it is only a matter of time before the company implodes.

    1. Sorry about the poor grammar (to scary->too scary). Also, I'm long a few miners & even bought some long dated calls (Jan 16) on some of the more depressed (but in my mind financially sound) miners.

  9. Hey John Taylor, just a couple of notes on Spellcheck Armstrong from the Sparks Ball Breaking Corps; I was gonna let this go, but when he can not pronounce Keynes, Boehner and again can not spell Salomon Bros, I just had to touch base with you. Needless to say, he has no clue on Weimar Republic, but has good company with Rickards, Roberts, Egon, Leeb and a cast of numerous unsavory others. Do all these donkeys get their copy at the check out stand in the grocery store?

    Like, I think Mark Twain said, "better to say nothing and write nothing, because once you do, people will realize how stupid you truly are. But hey, who am I to say since I do not have an interest rate chart going back to 300 B.C.? lol for sure


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