"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


Monday, July 7, 2014

Trader Dan's Grain Index Notches 42 month low

Benevolent weather and falling demand ( in anticipation of weaker prices ahead ) has led to heavy selling across the entirety of the grain floor this morning. The result is that my grain index has notched a 42 month low! This is very welcome news for the livestock and poultry industry as well as for consumers who can expect to see lower food prices ahead ( assuming of course that the trade will eventually pass through the savings).

I should also note here, that according to the most recent Commitment of Traders data through 7-1-2014, Managed Money or Hedge Funds still remain as net longs in the corn market in spite of the fact that corn futures scored a 4 year low today. Also this same category remain net long in soybeans as well even though they have been caught on the wrong side of the market and are now in the process of liquidating long positions at a very rapid clip ( not to mention starting to build shorts).

This informs us that if this category decides to get aggressively short, we have further downside to go across the corn and bean markets.

Crude oil prices are also continuing to weaken although they remain high but are at least headed in the direction that will benefit consumers and business for the moment.

The weakness in crude oil and its products today, especially gasoline, is weighing on the Goldman Sachs Commodity Index, which I wish to remind the reader is excessively weighted ( in my opinion ) in its energy component.

Notice the sharp retreat from the top resistance zone which has knocked the index back to a 3+week low. Also note that it has fallen back below the recent breakout point near 660.

I am also noticing that Cotton prices are trading near an 19 month low today. That will help keep the cost of clothing from rising too abruptly... more good news for the cash strapped consumer. Cotton fiber competes with the synthetics most, if not all of, which are tied to crude oil prices.

With the yield on the Ten Year Treasury dropping to 2.616% today, it would appear that inflation worries, at least in the area of commodity prices in general, have subsided for the immediate moment.


  1. Dan, no question most commods very heavy; Other than meats and stks we want to be sellers on rallies; all you gotta do is go to my favorite PM site and read their takes on the $, Stocks worldwide, % rates worldwide, MENA developments, the greatness of Putin and yayayayayadeyde, in other words, let's talk about how screwed up everything is so we do not have to talk about a disappointing gold and silver mkt; sparks and nothing here to see

  2. Wheat getting obliterated, gasoline futures in freefall, once again, the "Resilient Consumer" is off the hook and will have more free spending cash flow.

    Ergo, institutions are buying profiteering grains processors like ADM, and gulping down consumer stocks such as COH and KORS.

    John "Big Mac" Williams at shadowstats must be sweating profusely at the computer screen wondering what the heck he is going to write about next.


  3. ISIS encrouching steadily on a Baghdad that's gripped in political paralysis...

    "Iraq parliament delayed for five weeks, general killed near Baghdad"

    By Isra'a al-Rubei'i and Ahmed Rasheed
    BAGHDAD | Mon Jul 7, 2014 3:02pm EDT

    By Isra'a al-Rubei'i and Ahmed Rasheed

    BAGHDAD (Reuters) - Iraq's new parliament postponed its next session for five weeks on Monday, extending the country's political paralysis in the face of a Sunni Islamist insurgency which claimed the life of an army general on the northwestern outskirts of Baghdad.

    Citing the inability of political camps to reach "understanding and agreement" on nominations for the top three posts in government, the office of acting speaker Mehdi al-Hafidh said parliament would not meet again until Aug. 12.
    Putting off the work of reaching consensus for five weeks is a slap in the face to efforts by Iraq's Shi'ite clergy, the United States, the United Nations and Iran, who have urged the swift formation of an inclusive government to hold the country together.

    With no signs that Shi'ite Prime Minister Nuri al-Maliki will abandon his bid for a third term, his Sunni, Shi'ite and Kurdish opponents warn there is a risk that Iraq will fragment along ethnic and sectarian lines.
    "Things are moving faster than the politicians can make decisions," a senior Shi'ite member of parliament told Reuters.

    The Islamic State, an al Qaeda offshoot, and a patchwork of Sunni insurgents are holding territory they seized in northern and western Iraq, the majority of it taken last month.
    Kurds, who run their own autonomous region in northern Iraq, have taken advantage of the chaos to expand their territory.

    Maliki's opponents blame Maliki for last month's military defeats and want him to step aside. They accuse him of ruling for the Shi'ite majority at the expense of the Sunni and Kurdish minorities.
    Maliki said last week that he hoped to overcome the challenges blocking the formation of a new government after the new parliament's first session ended without agreement on the top posts of prime minister, president and parliament speaker.

    The Iraqi military, backed by Shi'ite militias and volunteers, has yet to take back any major cities but is trying to advance on Tikrit, the late dictator Saddam Hussein's hometown in Salahuddin province.
    The fighting is taking a heavy toll. The United Nations said last week more than 2,400 Iraqis had been killed in June alone, making the month by far the deadliest since the height of sectarian warfare during the U.S. "surge" offensive in 2007.

    A senior Iraqi general was killed in fighting with insurgents close to Baghdad on Monday, as the army fights to hold militants back from the capital.

    Major General Negm Abdullah Ali, commander of the army's sixth division, responsible for defending part of Baghdad, was killed just 16 km (10 miles) northwest of the capital.

    A few hours later, four policemen and three civilians were killed when a suicide bomber drove a minivan packed with explosives into a checkpoint in the mainly Shi'ite Kadhimiya district of northern Baghdad.

    Top U.S. defence officials, who have deployed advisers to the region to assess the state of the Iraqi military, said last week the security forces were able to defend the capital but would have difficulty going on the offensive to recapture lost territory, mainly because of logistic weaknesses.
    In the northeastern province of Diyala, where insurgents have been clashing with security forces, Shi'ite militias and volunteers for several weeks, Islamic State militants killed four civilians in the town of Udaim, a police officer said.


    1. They offered me a mission in the "safe side" of Irak.
      Lol. I love it, you had to think about that one :)

    2. Got to had it to those Iraqi politicians. They learned to take care of their party first even when the enemy is at the gates. Same as the USA ones.

    3. mike, still waiting for your $5 ribeyes?

    4. Steve.
      $4.99 per pound and they were good. Were you expecting delivery?

    5. Mike, hard to believe your prices; I pay $13 lb. choice ribeyes up here!

    6. Loss leader special by a local supermarket. You had to be there when they filled the case. Prices are back to their stratospheric normal now.

  4. always great stuff Dan!

    it's time for a stock mkt correction, should see the overdue -10% by the end of sept.

    ZWu4 looks best for turn around tuesday as wheat is normally up in july and really all the ags are too oversold to call short trades.

    ZSx4 the novy beans really need to touch the 1088.25 from last jan to make a nice double bottom...some are saying the head n shldrs goal was met today. also today ZCz4 the christmas new crop corn got under the jan 406.25 low on lower volume, and closed above..

    these are good cot report charts, in ags open interest really diving and commercials getn really long!


    1. 77;; bear mkts are supposed to get repeatedly oversold; only hoosiers buy into that; all things considered, we can go a LONG way south from here

  5. What is most extraordinary as of late is how "necessary commodity" spikes are easily reversed, even without Fed Jawboning.

    Seems like the commodity funds have a propensity to go long, never short, based on all the screechings of the doomsayers and hyperinflationists found all over the Internet.

    Therefore, prices of items like wheat and cotton simply crash on their own weight, without any catalyst whatsoever.

    On the other hand, "unecessary" commodities tied to econmic growth like copper, platinum, palladium, etc. are allowed to soar.

    All this, despite massive amount of money printing and QE, which is another factor contributing to the "Greatest Economic Miracle" ever seen in modern history.

  6. Crude lost its footing at the 103.50 level today...below that, no support until 102. Below 102, support is 99 at the 38% fib retracement level. With the tensions in the middle east, that seems a long ways away.

  7. DBC has utterly collapsed, down 8 consecutive days, as deflation is now rearing its ugly head.

    1. Meanwhile trx is magically on its way to a price where the 2.5 million warrants are in the money. Once a market manipulator always a market manipulator. Its fantastic to see jim promising production in september, do nothing whatsoever and the stock gets marked up. Anything goes. Just remember to sell, not buy, what jim sells or youll get sheered.

    2. Mark,
      Does this change your latest views on PM's? I see short positions by the banks on gold and silver have gotten huge.

    3. Concord; it is just a slop and chop 3 week hosing operation; nothing to do but just wait it out; dog days of summer; take care and breathe through your nose;


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