"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, September 15, 2014

USDA Latest Crop Conditions

Here is a summary:

                                   EXCELLENT                                                                  GOOD
                          09/14/2014            09/07/2014                         09/14/2014                      09/07/2014

CORN                    22                          22                                         52                                52

SOYBEANS          19                          19                                         53                                 53

As you can see, the crops held steady this week with the share rated Good/Excellent at nearly 3/4 of the entire corn crop and 72% for the bean crop. These are superb numbers. Last Friday, frost issues heading into the weekend propped up both markets and enabled them to shrug off the extremely bearish numbers from USDA in last week's Supply and Demand report.

With the frost damage minimal at best, the conditions index and more importantly at this point, the maturity ratings are going to come back into focus.

What a difference a single week can make for maturity.

I have been commenting recently about the lag in maturity of the crop with my thesis being that the outstanding growing conditions, ample moisture and mild temperatures, have kept more energy heading into the ears ( kernels) and pods respectively instead of the plants following their more usual process of beginning to shut down. That I believe is going to lead to heavier/larger kernel fill and the same with pod filling ( heavier/larger beans).

This week however both crops took some nice jumps in their maturity process. Corn is 82% dented now compared to last week's 69% and the 5-year average of 85% so it made excellent progress in that regards. A full 27% is mature compared to 15% last week and the 5-year average of 39%.

The extreme northern tier states are the areas in which the crop is the most behind but that is to be expected. It is also the reason that we got that burst of shortcovering when meteorologists began inserting frost into the forecast last week ( in those same northern tier areas). With recent forecasts showing a more seasonal trend in temps, we should begin to see some catching up on that maturity level pretty quickly now. By the latter half of this week, most of the corn belt will be enjoying some very nice warm temps.

By the way, 4% of the corn crop has been harvested. That compares to last year's number at 4% and the 5-year average of 9%.

For beans, 24% of the crop is now dropping leaves compared to 12% last week and the 5-year average of 32%. Not too bad!

I do not see anything in particular in these reports that would lend much if any support to the bull cause at the moment mainly because the forecasts that I see are not putting in any hard frosts for some time.

Today's blip up was the result of traders looking ahead to tomorrow's USDA acreage numbers ( from a different division with the USDA) trimming some off of the recent numbers we just got. My own view is that anything they come up with is going to be too small, ( if at all ) to change the perception of an enormous crop coming very soon. We will just have to wait and see.

I am more and more of the view that the last straw that the bulls are going to be able to hold to is an early killing frost, and while these weather forecasts are always varying on us, odds are lessening. Another week or two of nice warm days is going to really push this crop towards its final stage of harvest.

China's Economic Data Unsettles Copper Bulls

More pressure on the copper price this morning is coming as a result of news out of China that its industrial production for August showed the slowest rise since December 2008. Industrial output did rise 6.9% from the previous year's August but that was down from a 9% increase in July.

If that were not disconcerting enough to traders, China's retail sales rose 11.9% in August which is a good number, but it too was down from a 12.2% gain in July.

While at face value, these are good numbers, ( and wouldn't we love to see them here in the US!), the problem is that they feed into ideas that overall growth in China is continuing to slow. The general consensus is that China will experience an annual growth rate this year of 7.5%. This recent data throws some cold water on that expectation.

Copper, which is already seeing selling as a result of lower economic growth forecasts ( see my recent post on hedge fund positioning on the short side of the market ), has moved down to retest last week's low in price near the $3.06 level. If bears can succeed in breaching that, I frankly do not see much in the way of chart support until one nears the $3.02 - $3.01 level.  

As a side note, silver is also being pressured as is platinum which is continuing the theme of selling across the industrial metals. Palladium is a bit higher as I type these comments but its recent trend has also been lower. Clearly, investors are fretting about global economic growth rates.