"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, June 9, 2014

Gold Comatose; Corn Sinks on China news

Watching gold trade today was worse than watching paint dry. At least the latter provides some satisfaction when the painter steps back and surveys his handiwork. The former, however, is stuck in no-man's land.

It looks to me like it is drawing some support from the ECB's action last week but that is about all that I can see at the moment.

The mining shares are stuck going nowhere as well.

India appears to be doing some buying as the price falls which is not unexpected. The key for the metal will be how eager Western based investors are eager to acquire the metal.

Other than that, it is a waste of time.

The grain market however had some news this morning that rattled corn bulls - it appears that China found some unapproved little gene critter, namely MIR162 in a shipment of DDGs. That is a big "No-NO' for the Chinese so they wasted no time in ordering no more import licenses for US-origin DDG's. I am a bit unclear on this second part but it appears that they are going to require some companies there to ship the recently unloaded batches back to the US. Corn took that news quite hard and surrendered a good portion of last Friday's short covering rally.

One will have to see if any of this impacts meal since DDG's compete with that on the feed side.

So far the weather for this year's bean and corn crop looks very benign. There is  plenty of rain and no major heat in sight at the moment. This afternoon we received the weekly crop conditions update from the USDA. Those of us who have traded grains for a long time refer to these weekly reports as the ones that the guy in the pickup truck calls or emails back in to the office while sitting on the side of the road in farm country after looking out of his window to see the rows along the road.

That being said, 3/4 or 75% of the corn crop is in Excellent/Good condition compared to 63% last year at this time. On the soybean front, this week is the first week of the conditions ratings for this year's crop and it came in very strong - 73% is rated Excellent/Good. The USDA did not give us a conditions rating report last year on the beans but suffice it to say for now, the crop looks very good.

The only thing that some guys may want to try to get some mileage on in the corn is the fact that the rating dropped 1% from its Excellent/Good rating last week. Most were expecting some mild improvement because of the abundant rainfall. However, when you have 3/4 of the crop with those ratings, it is hard to find anything that would considered negative for the crop right now.

Iowa and Illinois are the two biggies for corn ( not to slight Indiana, Nebraska, Ohio, Minnesota, etc) so it might be worth mentioning that there was a tad of deterioration in the Iowa corn crop that came out of the "fair" category into the "poor" and "very poor" categories.

Last week's "Fair" rating was 17%. This week it dropped to 15%. One percent went into the "poor" category bumping that up from last week's 1% to 2%. The other remaining one percent went into the "Very Poor" rating which was at 0% last week and now stands at 1%.

However, the "Excellent" category jumped this week to 18% from last week's 17%. That improvement came out of the "Good" category which gave up 1% to 64% after registering a 65% last week.

I am not sure how traders will react to that.

Illinois however was a different story. The "Excellent" category saw a FOUR POINT increase to 21% from last week's 17%.  Corn rated "Good" there was unchanged but it was in the "Fair" category that the four percent came out of to increase the Excellent rating. Last week it stood at 27% rated "Fair". This week that fell to 23% with those 4% points moving to Excellent.

By the way, the Indiana crop registered a 2% jump in the Excellent category with all of that coming out of the "Fair" category.

Corn is 92% planted compared to last week's 80% and last year's 83%. The five year average stands at 90%.

Planting is running a bit behind in Michigan, Minnesota. Wisconsin and North Dakota. My understanding is that it had been a bit cooler and wetter than normal up in along the northern tier. They are all well ahead of last year's slow pace however even though they are behind the 5 year average. 

All in all, I cannot really find anything to be negative on based on this week's ratings but who knows what these people will do at times?

Soybeans are now 87% planted compared to last week's 78% and last year's 69%. The five year average is 81% for this time of year. Beans are well ahead of last year and the 5 year average.

The percentage of beans that have emerged is 71%. That compares to 50% last week and only 46% last year. The five year average is 62%.

If the weather cooperates that bodes well for a good crop.

China news seemed to buoy beans somewhat in the session as news came out from USDA that they had booked a 117,000 ton purchase of beans for the 2014-2015 marketing year. Traders were busy bidding new crop beans up as a result. Get used to this market getting tugged back and forth between those who have a bullish demand side view and those who have a bearish supply side view. Further complicating trading in the beans is that persistent tight carryover which keeps the bulls coming back for more. This week's USDA report will once again be closely scrutinized for further evidence of tightening old crop supplies. The closer we get to the delivery period for that July contract, the more goofy things might get in there.

A quick note on the US Dollar - it moved higher today as the Euro seemed to trade more in line with the behavior that one might expect from a currency whose monetary overlords have made clear that they view any strength in it as unwanted and unwelcome. It still remains above support near the 1.35 level so the bottom is still intact. The Dollar flirted with the bottom end of its overhead resistance level near 80.70-80.80 today but could not extend past it once again. It sure is trying to do so. The Yen however is not cooperating as it has gone essentially nowhere the last 5 trading sessions.

The S&P 500 scored yet another all time high today as did the Dow which is now knocking on 17,000. What has my interest however is the Russell 2000 which is really looking like it wants to make another run at the 1200 level. Watch this key index closely - if it takes that level out, stocks are going to all head higher. and that is probably going to make gold's going even tougher.