Another Volatile Day Ahead?

As you go through the day today, keep in mind that the minutes of the latest FOMC meeting will be released at 2:00 pm EDT. Recently, they been releasing "headlines" at 12:30, too, so stay sharp. The pattern of 2012 has been to sell PM whenever anything gets posted by The Fed or The Bernank. Therefore, be cautious.

What I hope to do while I attempt to take some down time is to rehash some "Greatest Hits". I plan to re-post daily a blog/thread from the archives, both from TFMR and ATW. We'll get to that in a moment but first...

Following along on yesterday's theme, the USDA issued a crop report earlier this morning and it was a doozy.

http://usda.mannlib.cornell.edu/MannUsda/viewDocumentInfo.do?documentID=1046

If you don't want to pour through it, here's what ZH has to say:

http://www.zerohedge.com/news/food-price-spike-dead-ahead-us-cuts-corn-crop-forecast-12-56-america-under-drought-conditions

And, of course, our own Grain Man "Art Lomax" is all over it, too. He's currently lurking in Pailin's Corner:

http://www.tfmetalsreport.com/comment/188505#comment-188505

The weather in The Corn Belt is only forecast to deteriorate over the coming weeks and the heat wave is expected to begin anew next week. Yikes!

http://ready.arl.noaa.gov/ready2-bin/javaanim.pl?id=GFS&mdl=grads/gfs&file=panel1&nplts=31&width=800&height=700

OK, so here is your re-post of the day. This one was originally filed at ATW back on 3/29/11. I must admit that the food price surge that I was writing about never quite materialized...yet. I was also incorrect in my theory that overt QE would continue past June. Regardless, it contains several points that are still relevant today. Namely:

  • "Let's start with the grains because rising grain prices cause all sorts of inflation. Not only are grains the raw input to countless consumer goods, grains are also the primary foodstuff for cattle ranchers and hog finishers as they prepare their herds for slaughter."
  • "OK, so how about corn? Corn is extremely important in food production as it is used not only as a primary ingredient but as a sweetener, as well."
  • "Have you ever heard the term "corn-fed beef"? Most of the best steakhouses proudly champion corn-fed beef because, frankly, its tastes a helluva lot better than grass-fed. The high sugar content of the corn gets converted into fat. The fat makes its way into the muscle and you, Mr. Steakeater, get yourself a beautiful, marbled "prime" steak. Fat cows are also desirable at slaughter because, well, they weigh more and cattle are sold by the pound. OK, so now, pretend for a moment that you're a cattle rancher. As your cattle are growing and being prepared for market (the term is "finished"), you want to feed them as much corn as they'll eat and you can afford. Corn at $7.00/bushel really cramps your business plan. Your first reaction is to control costs by thinning your herd, i.e. you sell some prematurely, before they are "finished". You might also simply want to sell some of your herd to take advantage of today's high prices. Either way, this extra supply in the short term has actually worked to keep cattle prices from soaring at the same rate as the grains. But this is temporary. By this summer, supply will decrease as cattle that would have been coming to market just then have already been slaughtered."

Here's the full post. You'll likely enjoy reading the comments section, too:

http://tfmetalsreport.blogspot.com/2011/03/ag-commodities-and-coming-inflation.html

That's it for today. Have fun and stay alert.

TF

Comments

exiledbear's picture

Grass Fed

I actually like grass fed better - it has a stronger taste to it. Corn fed does have more fat in it, but the meat itself is kinda tasteless. Corn fed is definitely cheaper (for the moment).

To each his own, I guess.

tmosley's picture

Good show, Dyna-mo!  I like

Good show, Dyna-mo!  I like it when people are willing to get out there and make empirical observations.  WIthout empiricism, you can never really be sure of anything.

exiledbear's picture

Fed minutes

Used to be:

It's not the minutes themselves, but the reaction to them.

Now it's:

It's not the minutes but the manipulation shortly before them.

Mickey's picture

do not forget ethanol gas

keeping gas prices up

every time the govt gets involved in something it should not--it gets messed up.

treefrog's picture

dagney, re popcorn

"long popcorn" 

there are lots of kinds of popcorn.  i'm partial to "strawberry popcorn."  not strawberry flavored, the ears look like two inch long strawberries.  decorative, tastes great, easy to grow, good way to get kids interested in self sufficiency.  what's not to like?

http://www.seedsavers.org/Details.aspx?itemNo=1195%28OG%29

rl999's picture

Another goody in obamatax

I haven't done any research into this, so take it FWIW.

Obama Gets Civilian Army In Healthcare Bill

Barack Obama has apparently fulfilled his campaign wish of establishing a civilian army along with setting up Universal Healthcare in America.

Details of the civilian army were hidden in the voluminous Obamacare bill, which our Congressmen and Senators voted on but did not read.

See the Patient Protection Affordable Care Act, page 1312:

SEC. 5210. ESTABLISHING A READY RESERVE CORPS.
Section 203 of the Public Health Service Act (42 U.S.C. 204) is amended to read as follows:
SEC. 203. COMMISSIONED CORPS AND READY RESERVE CORPS.
(a) ESTABLISHMENT–
(1) IN GENERAL.–here shall be in the Service a commissioned Regular Corps and a Ready Reserve Corps for service in time of national emergency.
(2) REQUIREMENT.–All commissioned officers shall be citizens of the United States and shall be appointed without regard to the civil-service laws and compensated without regard to the Classification Act 2 of 1923, as amended.
(3) APPOINTMENT.– Commissioned officers of the Ready Reserve Corps shall be appointed by the President and commissioned officers of the Regular Corps shall be appointed by the President with the advice and consent of the Senate.
(4) ACTIVE DUTY.–Commissioned officers of the Ready Reserve Corps shall at all times be subject to call to active duty by the Surgeon General, including active duty for the purpose of training.
(5) WARRANT OFFICERS.–Warrant officers may be appointed to the Service for the purpose of providing support to the health and delivery systems maintained by the Service and any warrant officer appointed to the Service shall be considered for purposes of this Act and title 37, United States Code, to be a commissioned officer within the Commissioned Corps of the Service.
(b) ASSIMILATING RESERVE CORP OFFICERS INTO THE REGULAR CORPS.—Effective on the date of enactment of the Affordable Health Choices Act, all individuals classified as officers in the Reserve Corps under this section (as such section existed on the day before the date of enactment of such Act) and serving on active duty shall be deemed to be commissioned officers of the Regular Corps.

[Note here that those personally appointed by BO -- without advice and consent of the Senate -- automatically become a part of the Regular Corps. Ed.]

http://askmarion.wordpress.com/2012/07/10/obama-gets-civilian-army-in-he...

Patrancus's picture

Chapter 9 Municipal Bankruptcy

For many cities and towns their is no other way out, I am familiar with one town pop. 10,ooo with over 68 million in debt, its absolutely frightening, over time reluctant public officials will return to the dire reality of the situation and begin discharging their debts with the stroke of the pen, this despite what the pointy head legal minds in black robes happen to rule. 

LaMachinna's picture

@Dyna mo hum

surprisesurprisesurprise  LOL hysterically.......  cool

criscrossing's picture

@Cal Law

Great stuff...thanks!

henry's picture

Life is good

Keep stacking !

TJeffson's picture

@Exiledbear - grass fed

Not to mention that corn fed beef ground into hamburger is nothing but fat and grease.  You cook that stuff on a grill and half your food disappears.  Grass fed is much leaner (usually) and tastes better.    My brother had his freezer go bonkers and spoiled hundreds of pounds of grass fed angus beef... he ended up replacing it with corn fed holstein beef (a steer fed in a feed lot) and he can't stand the meat.  He's been giving it away left and right.   Grass fed beef cattle are the best tasting meat you'll find I think.  

Dagney Taggart's picture

@Patrancus

That sounds more like a problem for the idiots who loaned them the money than the town's problem.

Oops. Long-er popcorn.

criscrossing's picture

Chris Hedges

@Jesse's Cafe American a great video presentation by Chris Hedges.  Well worth the time to view!

Dyna mo hum's picture

T Mosley

Thanks all...... You folks can always count on me to interrupt a serious discussion.

JY896's picture

'Gold pumping shill' Erste Bank full 2012 report on gold is out

... on ZH, of course.

Beyond the headline: "USD 2,000 is our next 12M price target. We believe that the parabolic trend phase is still ahead of us, and that our long-term price target of USD 2,300/ounce could be on the conservative side."

http://www.scribd.com/doc/99816519/Special-Report-Gold-2012-In-GOLD-We-TRUST

Some other tidbits from further inside the report -- lots of scenarios and data for 'mid-to-endgames' and 'fair value of gold':

“The amount of gold is finite by weight or volume, it is not finite by price”, John Butler

" Target according to Pareto distribution: USD 8,300 until spring 2015
Applying the Pareto principle to the current gold price, we find a theoretical price target of USD 8,300. If we were to assume that the last trend phase were to start in August 2012 at USD 1,600 and the bull market had begun in August 2001, the parabolic phase would last 29 more months and thus end in spring 2015. The price target according to the 80/20 principle is therefore USD 8,300."

"QB Asset Management calculates the so-called “Shadow Gold Price”. This model is not purely academic, but rather it is the way the exchange rate of paper money and gold was calculated during Bretton Woods (US monetary base divided by US gold reserves). The Shadow Gold Price describes the theoretical gold price at which the entire monetary base would be covered by gold. This way a debt-based currency could be transformed into a currency covered by assets.
Currently, the Shadow Gold Price is above USD 10,000. Given that the Federal Reserve Act of 1914 called for a gold cover of at least 40% we also depicted this cover ratio in the chart. The gold price would have to rise to USD 4,040 for this percentage to be reached. From 1945 to 1971 the required cover ratio was only 25%, which you also find in the chart. A 25% cover ratio would currently require a gold price of USD 2,525"

"Conclusion
In 2007, we set our long-term price target of USD 2,300 for the first time. We continue to expect the gold price to increase at the very least to its inflation-adjusted all time high of USD 2,300/ounce set in 1980. Long-term bull markets never end around averages but always set extreme values vis-à-vis other asset classes at the end of the trend. This supports our argument in favour of an imminent entry into the trend acceleration phase.
By drawing some historical comparisons we can see that even prices between USD 5,000 and USD 10,000 seem realistic."
-- NOTE: there is ample analysis, figures, historical data to back up this 'pulled-from-posterior' price range -- check out the report.

PS: As I scan through the report, it seems more and more like this is a document worth sharing (with anyone of moderate to slightly advanced knowledge of economics/finance or even any materials science) -- printing and 'snail-mail' to a select few who might be receptive is probably an even better idea.

The report quotes FOFOA on stock vs. flow, has thoughts on the impact of production rate changes & central bank buying, talks in detail about financial repression (ongoing  and expected):

"We believe that financial repression will continue to crop up in many shapes and sizes over the coming years. However, the long-term costs of the lack in efforts made towards consolidating national finances are substantial. While low bond yields in the short run suggest that the saving measures are on course, one has to bear in mind that this has mainly been achieved by market interventions. Therefore, we regard the gradual transfer of assets – a rather euphemistic term for gradual dispossession – as a disastrous strategy in the long run. What happens is that none of the previous problems of misallocation are resolved, but instead redistribution takes place (at the beginning mostly invisibly) and problems are dragged out, having to be addressed later.
As the dependence on these measures rises, so does the collateral damage to be expected later, and the seeds for an even bigger crisis have been sown.
"

On East Asia:

"Gold is often called the investment of doomsayers and chronic pessimists. This component is currently presented as the only reason for the gold bull market. However, this point of view fails to acknowledge the fact that China and India are the driving factors on the demand side. Real interest rates remain negative in both countries. On top of this the market is clearly underdeveloped with respect to its investment universe. Basically local investors are very limited when it comes to the use of their savings. Gold has been a time-tested store of value for centuries. The traditionally high affinity for gold and the rising net worth will support demand in the long run. Whoever expects incomes in China and India to continue rising and real interest rates to remain negative or low, will by default recognise gold as the beneficiary of these developments"

Plus: the shift away from petrodollar, prospects of a freely convertible (and/or gold-backed) Chinese reserve currency, and more.

Must-read material for goldbugs and non-goldbugs alike -- makes for a great bedside/coffee-table/bathroom reading item.

robov's picture

Crazy Rigged

The market responds the instant it is released. Therefore no time to even digest the information.

robov's picture

Total MOPE

Never seen more BS than ever! Lies, Lies, and Damned Lies. All of it!

Dyna mo hum's picture

UN treaty

http://www.foxnews.com/world/2012/07/11/un-arms-treaty-could-put-us-gun-owners-in-foreign-sights-say-critics/         No need to be concerned with this mess. After all we can always count on the Supreme court to preserve our 2nd amendment      Right?

Chris P. Bacon's picture

@TJeffson

"Grass fed is much leaner (usually) and tastes better."

And if you like that, try on some good grass fed buffalo. We switched to buffalo a while back, and the taste of greasy ground beef is now virtually revolting, like biting into the grease trap at Denny's.

At least in our area, it is readily available at a couple of the chain grocery stores (might have to ask the butcher where to find it), also at the local health food/organic store. It costs a little more, but as you say, you don't loose half of it when you cook it so it's probably at least on par in terms of value. Much tastier, and much healthier.

Thorn

[Edit] For comparison: Buffalo vs. Beef same cut of meat. In particular compare the nutrient balance and protein quality scores.

Stoxxman's picture

AU just dropped like gramma's underpants ...

http://pennystockjournal.blogspot.ca/p/gold.html

Volatile is right as rain. Yet another bang on call from our Guru Turd.

Beastly Stack's picture

Flush

I do not think we are going to get that sharp downdraft that many here have been fearful of!

Been trading futures for 12 years,just trying to help.

Let's see!

Be nice to see Gold stay above 1560

Dr G's picture

There is a distinct and

There is a distinct and special possibility that today will be the day that silver tests $26 support. Exact opposite of what Beastly Stack posted above.

Fair warning.

sdstacker's picture

CA Lawyer

You must drive the 215 a lot...I feel sorry

Dr G's picture

Bison is absolutely

Bison is absolutely delicious, and much better for you as well.

Bongo Jim's picture

@sdstacker

The 15 is bad enough.

Beastly Stack's picture

DR.G

False break in the dollar index,so far.

I am trading aussie and cad and they look pretty good.

PPT won't let equities break lower.

For silver to touch 26 ,the dow will have to fall 100+ pts from hear.

Just my opinion of course.

Fedup's picture

Small grass fed cattle

We bought a small herd of Lowline Angus last year and so glad we did. Those of you that have some room, but not enough for commercial sized cattle would do well to look into the breed. Can't say enough positive things about them. We have 140 acres of grass, which they were designed to finish on. Rich in omega 3's and we know what we're getting. Looking forward (sort of) to butchering one soon and selling or bartering the other.

ink's picture

It seems all was priced in

It seems all was priced in yesterday. Both gold and silver still in the green for today. And if it stays like this we have a series of higher lows. From ~1535 to ~1550 to ~1568.

Dr G's picture

@Beastly Stack, good post, I

@Beastly Stack, good post, I respect your analysis.

We can't ignore that nothing states silver and the DJIA need to trade in tandem.

Silver chart fundamentals look atrocious. I'm not a buyer here.

robov's picture

@ Dr G

Holding pretty firmly close to the @27. All PM's still green, barely, but still not nearly the shellacking compared to the last two releases. We are also in an area that has provided long term solid support.  Besides that how many weak longs can possibly be left playing in this rigged game. I would think those remaining are rather resolute.

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