"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 8, 2014

Corn and Bean Crops Holding Steady

USDA crop conditions and progress reports were released this afternoon and they show what most in the trade have come to expect, namely crops in outstanding condition.

Corn held steady with 74% of the crop rated Good/Excellent with the overall crop rated 93% Fair to Excellent. Remarkable!

Soybeans held steady from the previous week as well with 72% of the crop rated Good/Excellent but that masks the fact that the share of the crop rated Excellent moved up 1% to 19% with the gain coming from the Good category which lost 1% to it.

On the Corn progress front, which will now take on more significance since the word, "frost" is showing up, 95% of the crop is in the dough stage compared to last year at 91% and the 5 year average of 94%. 69% of the crop is dented compared to 61% last year and the 5 year average of 74%. 15% of the crop is now fully mature compared to only 8% last year and the 5year average of 26%. I maintain that this is the result of the ample rainfall which has kept the plant putting more energy into the ears rather than shutting down as the more seasonal dryness tends to produce. My view is that the lag in maturity is going to produce larger ears and more full kernels leading to an overall increase in the size of the crop when it comes to total production. Of course all of this will take a back seat now that the forecasts are showing some frost potential. Traders are going to be monitoring forecasts with the same intensity that we monitor the forecasts in late June/July for ridge and heat. Without any frost damage however, this crop is going to get bigger.

Ditto for the soybeans as far as to the relative maturity of the overall crop.
12% of the crop is dropping leaves compared to 10% last year and the 5-year average of 17%. In the Delta, Louisiana is 66% compared to the 5-year average of 57% while Mississippi is at 39% compared to the 5-year average of 47%. Arkansas is at 32% compared to the 5-year average of 22%. The South is in good shape. Then again, frost is rarely, if ever, an issue for down that way this time of year.

The big Three, Illinois, Iowa and Indiana are all lagging the 5-year average on leaf drop at 7%, 3%, and 18% compared to 11%, 10% and 23% respectively.

Since frost talk is out there we should look at Minnesota, Wisconsin and North Dakota. Minnesota is at 3% leaf drop compared to 6% last year and the 5-year average of 15%. Wisconsin is at 2% compared to 0% last year and the 5-year average of 7% with N. Dakota at 19% compared to 31% last year and the 5-year average of 25%.

What the crop needs right now is continued warmth/ seasonal temperatures and only moderate to light rains. As we get more leaf drop, dry weather is then needed/desired to facilitate harvest.

Again, traders will thus be glued to the forecast models before completely removing any weather premium left in these markets.

Incidentally, the Goldman Sachs Commodity Index notched a fresh 22 month low in today's session.

I am sure of one thing however; this will be completely missed by the gold perma bulls who will continue with one bullish prediction after another in spite of the soaring US Dollar and a sinking commodity complex. Eventually they will get it right but then again, when you keep saying the same thing year after year after year after year, eventually the market turns and you can then declare yourself a genius and a far-sighted prophet while you hope your acolytes will forget your many repeated blown calls. How sad that some continue to feel the need to make price predictions. As said many times here before, what is the point? It serves utterly no purpose whatsoever except to feed egos.

Good traders learn to read the tape and let the market predict itself. Even at that, they sometimes get it wrong. So what? At least they are humble enough to realize when they are incorrect and adjust or adapt and either get out of the way before they are harmed severely or go with the flow and profit thereby. They are flexible; not dogmatic nor wise in their own eyes.

Gold has been in a bear market ever since it broke down below $1530. No amount of manipulation claims, bullish predictions, wild theories, etc., have done a single thing to change that. Nor will they ever. When it turns, it will turn; not because some would-be psychics or self-proclaimed insiders claim it will but because the fundamental conditions that bring in money flows will change in the minds of traders.

I have traded in many different commodity markets over many years and I must admit I have never seen any market quite like gold in which so many possess such a cult-like mentality towards an inanimate object, a lump of yellow metal. It is quite disturbing to see what are no doubt otherwise rational and intelligent human beings acting in such an irrational and foolish manner and throwing all objectivity out of the window.

Strong US Dollar Pressuring Gold

The strength in the US Dollar is continuing to batter gold, ( not to mention a whole host of commodity markets) as the inverse connection between the two asserts itself.

Not only that, but continued outflows from the gold ETF, GLD and declining inflation expectations, are all undercutting the price of the yellow metal.

Here is a look at the US Dollar chart on an intermediate term. Note that the greenback is still trading within a 21 month long trading range but is approaching the upper portion of that range. Light resistance is near today's session high. Above that is the 85 level.

The RSI (shown below) is near 80 and at the highest level in over 4 years! Clearly this is one strong market at the moment.

Helping to further aid the Dollar today is the news that polling data out of Scotland shows a majority there now in favor of independence. This is pressuring the British Pound, which is one of the currencies that make up the basket comprising the USDX.

It is therefore rather humorous to continue reading the various breathless emails in my box detailing one more nail in the coffin of the US Dollar. All the while the currency marches relentlessly higher! One wonders how many of these people peddling this stuff ever bother to look at a simple price chart.

Needless to say, the strong Dollar is making for an ugly looking gold chart and ugly looking gold mining share charts as well.

The volatile juniors are still up for the year but the chart is currently negative with the index trading below all of its major moving averages and with various technical indicators all in clear bearish modes. The index looks to be on track for testing the bottom of its range near 32.

The HUI failed to hold the gap on the chart and is also in a bearish posture at the moment.

Gold bulls had better hope psychological support at $1250 holds or gold will revisit key support at $1240.

The Euro continues to fail at one support level after another and looks like it is heading to 1.2800. The weaker the Euro gets, the more difficulty gold is going to have.

On the grain front, we are watching the current forecast models for indications of the upcoming frost event see whether or not temps drop as low as were originally expected late last week. Today's models are showing the frost line further north but traders are still a bit jumpy and will be until the event comes and goes or the forecasts showing something more conclusive and less threatening. This afternoon's crop condition reports are expected to show phenomenal numbers so the grain bulls are praying for an early killing frost to bail them out.

I will try to get something up later after the USDA gives us those numbers.