NEW YORK, June 30 (Reuters) - The following comments were released by the
U.S. Agriculture Department as part of its Annual Acreage Report:
Corn Planted Acreage Down 7 Percent from 2007
Soybean Acreage Up 17 Percent
All Wheat Acreage Up 5 Percent
All Cotton Acreage Down 15 Percent
*******************************************************************************
Midwest Flood
Extensive rains and flooding during June caused producers in several
Midwestern States to change their harvesting intentions for crops
already planted, modify planting decisions for the small percentage of
acres not yet planted, and consider replanting options. NASS collected
most of the data for the annual Acreage report before the majority of
the flooding occurred. In an effort to more accurately determine how
many acres producers still intend to harvest for grain, NASS
re-interviewed approximately 1,200 farmers June 23, 24, and 25 in the
flood-affected areas. As a result, it was determined that U.S. farmers
intend to harvest 90.4 percent of their planted acres of corn for grain.
This is a change from 92.4 percent as measured during the first 2 weeks
of June. U.S. farmers intend to harvest 96.8 percent of their planted
acres of soybeans. Without this additional survey data, historical
averages would have indicated 98.7 percent of soybean acres to be
harvested. NASS will conduct a more extensive acreage update survey
during July. Findings from this study will be incorporated in the August
Crop Production report.
Corn planted area for all purposes is estimated at 87.3 million acres, down
7 percent from last year. Despite the decrease, corn planted acreage is the
second highest since 1946, behind last year’s total of 93.6 million acres.
Growers expect to harvest 78.9 million acres for grain, down 9 percent from
2007. If realized, this would be the second highest since 1944, behind last
year. Farmers increased corn plantings 1.31 million acres from their March
intentions. Planting got off to a slow start across the Corn Belt, Ohio
Valley, and the northern half of the Great Plains as frequent precipitation
and cool temperatures during March and April prevented spring planting
preparations. Corn planting was 27 percent complete on May 4, down 32 points
from normal. Despite intermittent showers and below normal temperatures,
producers were able to make rapid progress during May, particularly across
the upper Midwest and northern Great Plains. Farmers reported that
97 percent of the intended corn acreage had been planted at the time of the
survey interview compared with the average of 98 percent for the past
10 years.
Soybean planted area for 2008 is estimated at 74.5 million acres, up
17 percent from last year but 1 percent below the record high acreage in
2006. Area for harvest, at 72.1 million acres, is up 15 percent from 2007.
Compared with last year, planted acreage increases are expected in all
States, and the U.S. planted area for soybeans is the third largest on
record. The largest increase is expected in Nebraska, up 950,000 acres from
2007, followed by Illinois and South Dakota, both up 900,000 acres.
Increases of at least 800,000 acres are also expected in Indiana, Iowa, and
Minnesota. If realized, the planted acreage in Kansas, New York, and
Pennsylvania will be the largest on record. Nationally, farmers reported
that 79 percent of the intended soybean acreage had been planted at the time
of the survey interview, which is the lowest since 1996.
All wheat planted area is estimated at 63.5 million acres, up 5 percent from
2007. The 2008 winter wheat planted area, at 46.6 million acres, is
4 percent above last year but down slightly from the previous estimate. Of
this total, about 31.9 million acres are Hard Red Winter, 11.0 million acres
are Soft Red Winter, and 3.7 million acres are White Winter. Area planted to
other spring wheat for 2008 is estimated at 14.2 million acres, up 7 percent
from 2007. Of this total, about 13.4 million acres are Hard Red Spring
wheat. The Durum planted area for 2008 is 2.66 million acres, up 24 percent
from the previous year.
All Cotton plantings for 2008 are estimated at 9.25 million acres, 15 percent
below last year and the lowest since 1983. Upland planted area is estimated
at 9.04 million acres, down 14 percent from 2007. Decreased planted acres
are estimated for all States except Oklahoma and Virginia. The largest
percentage declines are in California and Mississippi where upland producers
planted 44 percent fewer acres than last year at 110,000 acres and
370,000 acres, respectively. American-Pima cotton growers planted
202,000 acres, down 31 percent from 2007.
This report was approved on June 30, 2008.
Secretary of
Agriculture
Edward T. Schafer
Agricultural Statistics Board
Chairperson
Carol C. House
“The End of the World as We Know it….And I feel Fine!”
-R.E.M.
Kevin on Oil CNBC Closing Bell Friday
(Video repeats in the middle, sorry)
Ok finally, after a week of wild trading I get to really sit down and answer a fraction of great questions my visitors and subscribers have sent me…Thank you. I also get a few heated e-mails that I respond to directly here. No use in mincing words, we are traders in very fast paced markets so I will always say it like it is. Ok I will waste no time telling you what an amazing trading week I had last week…Ok well maybe just a little.
First of all a big spanking for me.
I broker my own #1 rule, I talk about it in my book and there I was breaking it. Trading too much size. Taking on too big a position in the grains. The drawdown was massive as corn fell back and it took a huge chunk of my equity, I had my disaster stop set and was about to get hit when the Fed came to the rescue. My corn positions rallied recovering all my equity and handing me profits. It was a reminder of why I have my rules and that I better use them. Giving advice is easy, taking your own advice can be hard….Lesson learned yet again.
If you are going to be out in Vegas July 9-12 or even better in Vancouver at the end of the month, please swing by and say hi, let me sign a book for you, and let’s chat….I love meeting as many of you as possible and July is going to be a big month for that. Please drop me a line at the mailbag kevinscottkerr@mac.com register as a member of this blog or keep up with all the big changes that are coming, I hope to hear from you and to see you soon.
Now onto your e-mail.
Q. Hello Kevin,
no world record here, but the gasoline prices in Israel are being raised at the month end to $2.10 per liter (I recon around $7.94 / gallon ) for unleaded 95 self service (most of it is tax, of course). The price for gasoline is under price control, but is calculated according to some formula that is updated twice a month. It is not meant to be a subsidy or to constrain the market, but it does take away competition. I suppose the margins of the different gasoline outlet chains are really not that high, they try to make up for it by opening convenience stores and so on. The only advantage that I can think of of the price control is you know you’re never getting a bad deal filling up in some country location, prices are uniform throughout the country.
Did you ever get that mail that I wrote to you about Gothenburg? It was so interesting to read that your family hails from Gothenburg, that’s where I grew up. I wonder if you have any subscribers there. My mother and brother live there, I know the city quite well.
I have a theory about OPEC and the oil price in the US and Europe that I would like to share with you ( I think perhaps the kernel of this idea I picked up in some article I read long ago):
OPEC probaply figures, that when oil was selling for a “normal” price of $50 a while back, the effective price of oil in Europe was perhaps $150 with the taxes on gasoline, so that means that European governments are actually pocketing more money from the sale of every barrel than the producers of OPEC are! So why should they sell the oil for cheap? If the Europeans pay an effective price of $150, why shouldn’t the Americans as well? Now the Americans are paying approx. $140, and they can bear it, apparently, even if they cut back on driving a little bit. The Europeans of course are paying around $320 a barrel now (159 liters/barrel times around $2 per liter), but that’s their problem (in OPEC’s view), they can always lower the tax a little bit and lower their outrageous (tax) revenues if their citizens have a problem with this.
Of course I’m not disregarding all the other explanations, such as increased demand, I’m just saying that OPEC are very happy right now….nobody is preventing them from making contracts selling oil at $90 if they so wish….it’s not against the law.
I apologize but I disregarded the refining costs. So do the Americans, apparently, since the refineries are hardly making any money. I have VLO and it was a deep value play, and I’m going crazy from it.
I’d be happy to get a short responce to see what you think of this theory. I have more to say…(”who said “The market is well supplied”, well supplied my ….” ).
Best regards,
Yitzchak
A.
Sure and thanks for writing in. Gothenburg, nope but have always wanted to go there. My grandmother and my ancestors were from there as you know. Maybe this year I will get there, I would love to see where our Swedish roots come from. The other place I want to go is Scotland, the other side of the Kerr genetic roulette wheel. Can’t get much more Scottish then Kevin Scott Kerr after all.
Sero Sed Serio I think is our crest, something about the sun…Anyway, both places are on my must visit list. I think your theory is spot on. Look it ’s because of many reasons that we have these oil prices, greed, stupidity, and laziness come to mind. There are many things that can be done, the question is will we elect people who will do them. In this country I doubt it. Americans need pain for motivaiton, it’s true. We don’t do anything until our feet are in the fire…Look at Pearl Harbor or 9/11 A shock to the system Motivates Americans
That means gasoline at $10 a gallon and crude at $350, that’s what it will take in my opinion. At least the possibility of drilling is being disussed, that’s a start but a helluva long way from doing something. Under indecison (see also Ben Bernanke, all talk no do). Thanks and please write in anytime. Best, Kevin
Q.
Kevin,
Saw that you said we could be out of the gold trade quickly …. that surprised me because my broker says you’ve said gold could go to mid-1000s (I think) this year & I figured you were looking for at least a surge over 1000. Since I added some futures to your option, I’m really concerned re: what your thoughts are … thanks
Mark B
A. Well Mark, whenever I nail a trade on the upside and the downside, like i have with gold the last two times, I never press my luck. Heck, 50-75% profits in only a few days is rare indeed. Gold is volatile just like the rest of the commodities and profits are profits. I will at least take half profits next week if they are this hi then I can ride the rest or I may grab them all. Longer term I am bullish, very bullish on gold…I do not however look at these markets as an investor but as a trader, and there is a very big difference….Good luck my friend and please visit the blog and write me anytime. Best, Kevin
Q.Kevin,
I just returned from Nicaragua. The best gasoline price I saw there was, I think, C$25.34/liter. That’s 25.34 Cordoba x US$0.05546 x 3.23 l/gal = US$4.539/gal. Diesel fuel was priced at about the same as regular gas, plus or minus a few centavos. The price in Managua ran about one Córdoba higher in each category. I used the conversion rate given on Yahoo! of 18.032/dollar, although for most of my purchases we used an even C$20/US$.
By the way, apparently Agora’s policy of no individual advice was applied in my case to prevent Byron from responding to my question. One of the purposes of my trip was to visit the Polaris Geothermal installation at San Jacinto Tizate. My question to Byron was to ask if he had any specific questions he would like me to ask. Since I received no reply, I made up my own list. I know the recommendation for GEO.TO was in his other publication, but I’d appreciate it if you would let him know I have some information - and pictures - which his readers might find interesting.
Bob
A.
I will forward it on to him and let him know…I know I am dying to hear…Thanks KK
Q.Dear Kevin
For days I had been reading your e.mails, no purpose!!! I have recently subscribed to your service and what??? E.mails full of BLABLA. NO single rekomendation of any kind during my membership period. Statements thatt somebody may think are recomendations dont make any sence to me. Your travels and social engagements and other garbage. Is that what I payed for the service? not a single reco to make me 1$. Are you going to shape UP?
Do not publish this.
regards
(name witheld due to request)
A. Answer withheld because you’re an idiot. “SHAPE UP” Why don’t you GROW UP, put on the big boy pants and focus on what I am saying. We just did a gold trade three days ago that is up 60% almost…We just grabbed profits on soybeans and corn of over a 100% each. Get serious. This isn’t a trade factory where 12 new trades get churned out every day. E Look it sounds like this “trading stuff”is not for you, if 60% profit in a few days isn’t enough for you, I suggest you get a refund and move on. My grammar and spelling are awful but yours is a 911 emergency. Focus on that for right now first, ok…Us adults will be over here trading when you are ready let us know. You see I got my point across to you without any “social or travel info”, hope you enjoyed it. I know I did. K
Q.Kevin-
I have had a couple of emails blocked by your ‘spam’ filter.
Any suggestions?
It was an interesting essay I was sending on for your enjoyment.
See you in Vancouver
Fred P
A. Hmmmm, I will look into it but be sure to white list my URL and mailbox, that might do it..Thanks for letting me know. K
Q.Kevin;
I noticed in your recent email that you would like your subscribers to let you know when they filled an order. I am a brand new customer of yours with the RTA and last week (the day after I got the email notice from you on it) I filled the gold spread option play with Bob Miller at Foremost Trading, LLC. This was my first play in doing options of any kind. I am very happy so far nedless to say. Hats off to you for picking this gold play seeing that the front month futures contract for gold hopped up 3.7% (yesterday), the biggest one day gain in 23 years.
I have never done options before but I am looking forward to it. My main investing just consists of having most of my money in silver bullion bars (in storage) on a margin account (a 1 to 3.5 ratio account) which has done well over the last year or so. I got into silver at the $13.00 per ounce level.
I feel that gold and silver will both be doing quite well over the next few years. I think that silver will be at $50 an ounce one and a half years from now and $100 an ounce three years from now. I think that gold will be in the $2,500 to $3,000 range in three years from today.
I have a sense that silver will start to go up fairly well in November of this year. Where you possibly thinking of doing any option plays on silver in the near future? Just wondering, I am very big on silver.
Thank you for your help and best to you!
Andy M
Washington, DC
A.That’s awesome, yes we sure have called gold right this year, first by sellling it thew day before it crashed and then buying it again for this run up…It doesn’t get much better than that…All the best, Kevin
Q.Hi Kevin - LOL you should resist watching that morbid stuff! On a more positive note, for the first time since I’ve been an RTA member, I’ve added a trade “mid-way”, ie., quite bit after the initial reco was given. In this case it was sugar. I added when it had been really beaten down and members were sending you (I have trouble believing how) rude emails criticising the trades they put on. Trying (and this is a constant battle) to use sentiment as a reverse indicator I put on the sugar trade on May 17, 2008, extending the month to January 2009 (SBF917C). I got filled at 0.48 and today it closed at 0.64 today. With sugar following oil up, and with a lot of time left on it, this trade could get even better. Your gold reco was exquisite. I had been suffering through the wild ups and downs of the intermediate bear in gold since the Bear takedown on March 17 (I’m following Jim Sinclair’s general direction on gold, but the chopping market has been devilishly hard to trade).
But since your reco, gold has taken off like a rocket and, supported by the strong weekly MA and RSI, it looks like we may have started the next bull upleg. Dude, your timing on gold was as exquisite as it was in August 2007 (when I first joined RTA) and February 2008 (I should have listened then!). So, kudos and more kudos. And even more kudos on the corn (I got out early, with a 100% return) and the beans (I got in late and recently got out with a small loss, which to me is just like a win). Keep up the excellent work (no pressure here, LOL). Regards, Tim T, Hong Kong
A.Hey Tim I was just in Hong Kong, I would love to come back soon. “Dude, your timing on gold was as exquisite as it was in August 2007 (when I first joined RTA) and February 2008 (I should have listened then!)” Yes not to sound conceded but I am amazed at my calls on the metals the last couple of years and recently it has almost seemed psychic. Glad you are enjoying yourself. Stick with it. All the best, Kevin
Q.I sold the balance of my bean oil for 700. so holding on for the extra few days paid off for me. This was a nice one!
George M
A. I thought so too. Sometimes the profits just come fast and furious like that. Bam! It can happen with loses too so take it all in stride and fight on as they say! KK
Q.Dear Kevin,
got filled for sugar & soybean oil. I even did better on the sugar because i also bought 07/2008 12 calls at 20 and sold at 82 points !
I should also thank you for this trade because you give me the information to make now and then a trade on my own ( I also bought some december cotton 85 call at 2,2 )
Best Regards
Boelen B
A. Again awesome move on your part with the cotton. In my opinion that is a very smart trade indeed. Best, Kevin
Q.Kevin,
I notice you tend to recommend buying naked options or debit spreads, but not selling naked options or selling credit spreads to open a trade. I wonder why?
Some argue that out of the money selling credit spreads has limited risk and is more likely to win than buying options or debit spreads? But the downside of selling credit spreads is that the ratio of risked amount to potential reward is much greater than buying options?
Thanks.
Dan
A. Great Question. I have no particular bias to the long or short side or debit or credit spreads. on thing I never do in a newsletter that I do quite often in my own account is write options. Unlimited risk in a newsletter format is never a very good idea for many reasons. And your point on risk reward is true and that is another factor in why I do the spreads I do. Personally I do not like spreads but with premiums and volatility as high as they are, spreads are often very necessary. KK
Q. evin:
I just read your last news letter. There was a subscriber looking for a free commodities reporting. I use mfglobalfuture.com by Man Financial. Also Ino.com and futuresource.com are good in that order. However, these charts have a time delay of a few hours. But for our type of trading, I find them acceptable.
Dave K
P.S.
I believe way back when you recommended using futuresource.com and Ino.com
A. correct. There are so many resources out there nowadays but some are certainly better than others. Real time quotes can be pricey and for options trading you don’t really need it. Live charting is the same story, for the average trader. Having said that I have real time everything and it comes with a big bill every month but then again this is my livelihood. Take care and good luck, KK
Q.Hope you’re having a great vacation. You seem to enjoy being kept informed of our results, so here are my last 3 sales. In my brokerage acct I sold 5 sugar contracts @ 224 (25% profit) and 5 at 3313.6 (75% profit). I chose not to sell my bean oil on the first recommendation and sold 2 @ 610 (94% profit). Finally, I bought beans a few days after you recommended bean oil and sold 2 bean contracts @ 141 (139% profit). All in all, a really good week. I also repeated the same series with fewer contracts in both my wife’s and my ROTH IRA’s and a brokerage acct I handle for my mom. All accts have a good amount of cash and I anxiously await your next recommendation.
George
A.Unfortunately I always seem to be trading on my vacations…lol Sounds like you are having a fantastic 2008, keep your head down and it could be the best year yet…I am doing the same. Take Care and best to your family. Good Luck, Kevin
Q.Kevin , we got 630 points and I have 2 options .
I made $ 2820 before commissions .
Thank You very much !!!
Good Job !!!!
Ruben
A.Yup, it’s real money indeed. Who says corn isn’t having a good year….It certainly is for us! Best, Kevin p.s. Enjoy those profits
Q.I had 1 47 Call at 2.20 and sold it today at 4.10 for an 87% gain before commissions. If an alternative trade is recommended a close for that alternative should also be recommended.
Bob D
A. Yes, very good point…Duly noted. Thanks Bob KK
Q.Hi Kevin,
I’m just a young guy (like you), fed up with typical financial people telling me to make typical investments that typically don’t make me any money! I’m 43 and have 2 young kids and make a pretty good living but can’t seem to obtain that “take you to the next level” piece of investment advise! Sure, I’m up all night reading financial stuff on the internet, but your name was mentioned to me and apparently you are somewhat of a maverick and maven on commodities. I’ve never invested in commodities so any direction you could offer up would be GREATLY appreciated for a commodities novice!! I also hear a lot about coal, what is your take on how to or if to get involved with coal???
Thanks a million!!
Mitch L
A. I am called a lot of things. Not all of them good…lol Look I do not consider myself some Guru ro old school commodities guy like His Heiness Gartman or some of the others. I am a guy who has learned form some of the best over a twenty year career in commodities trading. These markets are changing and fast and we are on the cutting edge here. Coal is an awesome market that has a very bright future. I have bought many coal stocks for my portfolio and I will continue too. As my friend Larry Kudlow says, the “US is the Saudi Arabia of Coal” Amen. Welcome aboard, KK
Q.
Hi Kevin,
I’m a little late reporting this, but I bought the 1050 Dec gold call on the day you made the recommendation (6/17). I watch gold a lot because I have a lot of Canadian exploration stocks, and felt that the current correction is close to an end. That’s why I decided to go with the call instead of a spread. Looking at the trading for last Thurs and Fri, it sure looks to be like we had a valid breakout – take a look at some of the gold stocks (I don’t think they would be so strong if the metal wasn’t going higher). Anyway, your timing is outstanding.
Thanks so much,
Larry L
A.I will take luck anytime I can get it. What I find however is the harder I work the luckier i get. Be well, Kev
Q.Kevin,
I have been on vacation in Israel for the past 3 weeks.
My Commodities broker has been following around this country(by phone)First I got a call in Jerusalem to get out of our bean spread. Then another call when I was at the sea of Galilie enjoying St. Peters fish at the best place to enjoy it, En Gev.
Finally I was in the ancient port of Jaffa when my broker called me about getting out of Corn with a profit.
I am glad I stuck with you. Last year was rough, but so far this year has been awesome.
All the best to you and your family.
Michael S
A. Yup my broker is the same way, he could find me in Timbuktu, and he has. Anyway, yes last year was tough and then about in June it started to turn around…Trading is cyclical and it’s important to manage equity to be able to weather those tough times that come to all traders. Betting everything on Red and hoping for the best is better left to casinos, risk mgmt and discipline is the key to profitable trading. Take care, Kevin
And our last e-mail for this Mega Mailbag…
Q.I just started on 6/10/08, and 80% + on my initial start up investment. I bought soybean and corn then on your advised have sold them both. I still have the soybean oil and just bought the Aug gold 6/26/08. I am waiting for your next recommendation. I am very appreciative. Guillermo
A.I am sorry to hear you are so disapointed…lol Congratulations on those gains that’s fantastic.. I am very glad to have you on board…Best of luck, Kevin
Ok well that’s all the time we have for this mailbag but I will have to do another one this week because there is simply so much mail, Remember, I cannot answer your e-mail directly but I do read all of them and will try to respond to as many as I can right here in the mailbag.
Form near and far..The mail will always get through
Where in the World is Kevin Kerr?????
A. Kevin, deep in the shale oil mines of Narva, Estonia on the border with Russia!
From My KerrTrade.com Road Warriors, AND AgWeb.com
6/24 - Saline County, Southern Illinois: Started replanting beans today hope to finish this week still have spraying to do, then hay. Guys are just starting wheat harvest haven’t heard about yields yet. Corn looks terrible beans are just now coming up. But we have a crop to nurse and hope for. My heart goes out to those that have lost their crops from the resent floods or droughts depending on which side of the belt you’re on. Good luck and God Bless!
6/24 - St. Clair County, Southwestern Illinois: After receiving 30 inches of rain since March 1, we finally got a welcome three tenths on Friday. I would put corn planting at 100 percent complete and beans at 90 percent complete. The corn looks good from the road but if you walk the fields you will see the stands are nothing to write home about. I am not complaining about any of my crops or how they look because I feel EXTREMELY FORTUNATE just to have mine in the ground. Wheat harvest began here on Saturday but I haven’t heard of any yields. The county has very few wheat acres even with the huge spike in prices we witnessed this past spring. We could use an inch of rain here as the corn is starting to curl in the late afternoon sun. The beans are just starting to poke through. My thoughts and prayers continue to go out to the folks dealing with the severe flooding and the folks dealing with the severe drought.
Now here is a special note from Bob Miller of Foremost trading on yesterday’s RTA sell order to grab up to 120% + profits on the November Soybeans, we will try again today, but here are Bob’s thoughts.
This email is for those who are Trading the RTA newsletter with us at Foremost Trading. Excuse the “bulk nature” of this email, however by this method I can let you know what has happened with the order(s) received from RTA newsletter.
Good evening RTA Traders.
Today we received this RTA alert which read…
Urgent Trading Alert – Sell All Soybean Spread
Action to take: Call your commodity options broker and say: “I want to SELL ALL of my November 2008 Soybean (SX8) 13/14 call spreads at 62 ($3,100) or better good till canceled (GTC)”
Although we placed the order to exit the Nov Bean 1300/1400 Call Spread order immediately, the top of the bean market had been made for the day we had no fill.
Beans opened firm and moved up for about 15 minutes, paused for a little sideways movement, and at about 10 AM (Central Time.) the exit alert arrived. Yesterday’s settlement was 62 ¾ on the spread. Today it settled at 61 3/8 down 1 3/8. Settlements do not always represent a true market price. The trading of the spread is the real price. All day long the bid/offer was a full cent on the spread and some of the time even more. Going into the end of the day the last bid/offer I received was 58/59. A full 4 cents off the 62 price the order was in at.
It is interesting to watch the change in this spread. With the Nov beans at 14.91 today you can see that this spread 1300/1400 call spread is deep in the money. With beans down 11 ¼ cents today the spread only lost 1 3/8. The high of the bean move was one week ago today. That day the bean futures settled at 15.53, and the spread was at 67 ¼. Today at 14.91 down 62 cents in one week the spread has lost less than 6 cents. I tell you this because even if we do not get a immediate rally we will not loose much on the spread unless the beans really drop a lot. Yes they could, but probably not too much and probably not too fast.
We will see what the next few sessions have in store for this spread. The order is in as a good till cancel.
Have a great evening,
Bob Miller
Foremost Trading LLC
——————————
I am off to Vegas for FreedomFest July 9-12th, hope you can join us or at least come by the Bellagio to meet me and my staff, love to say Hi. www.freedomfest.com
Also, don’t forget to come to Vancouver for the Annual Agora Wealth Symposium. www.agorafinancial.com July 22nd-25th
————————-
The crops for 2008 are going from bad to worse sodon’t be fooled by any USDA happy predictions. Sure the water is pulling back but in its wake it is leaving decimated crops, ruined fields and disease. Even corn that may look good from the road is just a mirage. The fact is that if you go up and look at the corn that is growing the yields are going to be awful. Now the worst part. HOT HOT HOT July temps are moving into the Midwest and the crop (both soybeans and corn) are simply not mature enough to handle it.
The crop will be toast, especially corn. Crop treatments have either not been put on or have washed away, and man are those expensive. But if they work they are they can save the crop. Many farmers simply cannot afford more treatments money is getting tight form all this re-spraying and planting.
I think this may be corns last big run before the bottom falls out and it is a good short into 2009. I am looking at grabbing up to %180 profits on corn options and then rolling into puts for 2009. Stay tuned. I am doing a mailbag (long overdue) here on the blog and it will be posted later today. Remember to register as a member of the blog and you can leave comments and post questions. Or just email them to me at kevinscottkerr@mac.com
And finally this form Investors Biz Daily.
Nuclear Hourglass
INVESTOR’S BUSINESS DAILY
Posted 6/24/2008
WMD: Only last fall, the head of the U.N.’s nuclear “watchdog” said Iran would need three to eight years to acquire an atomic bomb. Now he says six months to a year. Is he dishonest or incompetent — or both?
see http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=299200015738105
One of Kerr Trading and Outstanding Investments Best, Byron King writes in with some solid stuff. Read on.
Hey Kevin,
I can be flip in my emails, but this is serious stuff. Big time!!!
American Association of Petroleum Geologists rarely takes a “political” stand. Because AAPG values its credibility.
But on the issue of “use it or lose it” for federal leases, AAPG comes down hard on the side of opposing the Democratic Party and its leadership.
This is truly a gauntlet tossed down!!! Like, “Just Say No!”
It’s a rock-solid, scientific challenge to the idiocy of Demo industrial planning and energy policy mis-management.
Gee, the Demo Party is all in favor of “science” when it comes to global warming.
How about now, when “science” comes down in favor of a prudent approach to offshore drilling?
Really, if the Demos pass “use it or lose it,” they will be on the pathway to utterly wreck the energy economy of the US.
And for sure, after they do so they’ll blame it all on Bush-Cheney-Hitler, Rush Limbaugh, Karl Rove and the rest of the Republicans in the Congress. Oh, and Halliburton too.
WASHINGTON, DC, June 23 — Enactment of legislation to compel federal oil and gas lessees to develop their blocks could increase instead of reduce prices, the president of a leading association of energy professionals warned US House leaders.
“US consumers are burdened by high crude oil prices. Conservation and efficiency improvements are necessary responses, but equally important is increasing long-term supply from stable parts of the world, such as our very own federal lands and Outer Continental Shelf,” said American Association of Petroleum Geologists head Willard R. (Will) Green.
“As Congress considers measures to deal with high crude oil prices, I urge caution. Policies that increase exploration costs, decrease the available time to properly evaluate leases, and restrict access to federal lands and the Outer Continental Shelf do not provide the American people with short-term relief from high prices and undermine the goal of increasing stable long-term supplies,” he said in a June 23 letter to House Speaker Nancy Pelosi (D-Calif.), Majority Leader Steny H. Hoyer (D-Md.), and Minority Leader John Boehner (R-Ohio).
The letter is significant because AAPG and its leaders rarely take public positions on political issues. It is an apparent response to H.R. 6251, which House Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) introduced on June 12. Formally called the Responsible Federal Oil and Gas Lease Act of 2008, the legislation has become known as the “Use it or lose it” bill because it would require federal oil and gas leaseholders to promptly develop or relinquish their leases. Republicans are concerned that it could reach the House floor this week without hearings or a markup.
Potential suggested
Pelosi and other congressional Democrats have cited the committee majority staff’s June 4 report, “The Truth About America’s Energy: Big Oil Stockpiles Supplies and Pockets Profits,” which said that “68 million acres of leased but currently inactive federal land and waters could produce an additional 4.8 million bbl of oil and 44.7 bcfd of natural gas.” This would nearly double total US oil production and increase gas production by 75%, cut US oil imports by more than one-third and be more than six times the estimated peak production from the Arctic National Wildlife Refuge, the report said.
Republicans on the Natural Resources Committee said the majority staff’s report does not clarify how the numbers were developed or what source was used to conclude that the leases contain commercially producible oil and gas deposits. Minority staff members “requested information about this extrapolation and were told it is based on an ‘internal analysis’ of data from the Bureau of Land Management and the Minerals Management Service. It is unclear what, if any, input either of these agencies had in the extrapolation found in this report,” Ranking Minority Member Don Young (R-Ak.) said in a June 20 letter to Rahall.
H.R. 6251’s assumption is flawed, Green suggested in his letter. “The process of leasing, evaluating, drilling and developing an oil or natural gas field typically takes 5-10 years. Some fields come online sooner. Others are delayed by permitting or regulatory delays or constraints in the availability of data acquisition and drilling equipment and crews. Large projects and those in deep water may require a decade or more to ramp up to full production,” he said.
A lease block’s grid map “makes it tempting to think of exploration as a process of simply drilling a well in each grid block to determine whether it contains oil. But because of the natural variation in regional geology, one cannot assume that oil and natural gas are evenly distributed across a given lease or region. Rather, exploration is about unraveling the geologic history of the rock underneath that grid block, trying to understand where oil or natural gas may have formed and where it migrated. If the geology isn’t right, you won’t find oil or natural gas,” Green explained.
‘Intensive assessment’
Geologists begin an intensive assessment once a lease is awarded, he continued. They collect new geological, geophysical, and geochemical data to better understand the lease area’s geology. If they see no evidence of a suitable trap, the producer will relinquish the lease. But if they see a trap that looks interesting, the lessee will hire a drilling rig to find out if the geologists are right.
“Drilling is the true test of the geologists’ model, and it isn’t a decision to be made lightly. Drilling costs for a single well can range from $500,000 for shallow onshore wells to over $25 million for tests in deep water offshore,” Green noted.
Geologists continually collect and evaluate data as the well is being drilled to determine whether it conforms to their expectations based on the geological model. Eventually, they reach the rock layer where they think the trap is located. If there is no oil or gas at that point, the lessee has drilled a dry hole. “At this point, the explorers will evaluate why the hole is dry: Was there never oil and gas here? How was the geological model wrong? Can it be improved based on what they know from the drilled well? Depending on the results of this analysis, they may tweak the exploration idea and drill another well or decide the idea failed and relinquish the lease,” Green said.
If oil or gas is found, the well will be tested to see what volumes flow from it. Sometimes, those are so low that further expenditures are not justified and the well is abandoned. If the results are promising, several additional wells are drilled to better define the trap’s size and shape, the AAPG president said in his letter. “Based on this revised geological model, engineers plan how to develop the new field (e.g., number of production wells to drill, construction of oilfield facilities and pipelines). Using complex economic tools, they must decide whether the revenue from the oil and natural gas sales will exceed the past and continuing expenses to decide whether it is a commercial discovery,” he said.
Access required
“As you can see, oil and natural gas exploration is not simple and it is not easy,” Green told the House leaders. “It requires geological ingenuity, advanced technologies, and the time to do the job right. It also requires access to areas where exploration areas can be tested—the greater the number of areas available for exploration, the higher the chance of finding oil and gas traps.”
Democrats did not respond to the letter immediately. Boehner, the House’s minority leader, said in a statement that it shows that Rahall’s bill “is nothing more than a hoax designed to provide political cover to rank-and-file Democrats caught between their constituents who strongly support more American energy production and their liberal Democratic leaders beholden to radical environmentalists who want oil and gas prices to rise even higher.”
“For Democrats advancing the claim that American energy producers, and not they, themselves, are the ones responsible for preventing the millions of barrels of American oil and billions of cubic feet of natural gas from coming to market, today’s letter from a respected organization of international geologists couldn’t have come at a less convenient time,” added Minority Whip Roy Blunt (R-Mo.).
“That’s because the more and more the American people learn about the real causes of our current energy crisis—they’re already aware of the effects—the less and less the majority’s straw man platform on energy makes sense,” Blunt continued. “Later this week, we’ll see the latest iteration of that strategy when Democratic leaders attempt to pass a ‘Use of lose it’ bill that’s already the established law of the land,” he maintained.
Independent producers who would feel the impact of a “Use it or lose it” bill expressed their concern on June 20. “With the regulatory hurdles that are already in place, most companies are in an all-out sprint to develop the energy on a lease within a 10-year period,” said Marc W. Smith, executive of the Independent Petroleum Association of Mountain States in Denver. “If H.R. 6251 were to become law, the resulting burden on domestic energy producers would make it difficult for them to meet our nation’s long-term energy needs.”
Well as our Fed leaders gather today and Wednesday we will get the play by play from the media, yawn.
Here’s my prediction: The Fed move is likely to have a strong statement on inflation and the concern for the dollar, but no rate increase. Truly, even if they voted for a “radical” .25 increase to shock the market, what are we really talking about. Nothing! Now, I am no economist, I am a trader. So I am the first to admit that my understanding of what is best for the economy may be a bit skewed.
Let’s face it, the job market is softening, business is scared of who will man the White House come next year and consumer confidence is on a cliff. Meanwhile, inflation is soaring, more mortgage resets are coming down the pike and heating oil prices this Winter are going to be obscene. Oh yeah, flooding in the Midwest will cause almost all categories of food to soar, corn is only the tip of the iceberg. Everything from cherries and dairy in Wisconsin to Cattle and soybeans in other Midwest states.
The meat market will also be decimated as feed costs become out of reach for most feedlots. Enjoy that $50 steak at Ruth Chris, it will cost you $100 next year.
I have followed the meat markets for many years and in all that time I have never experienced a better time to buy futures, cautiously. I wrote an article a few years back that seems like i could have written it yesterday. Here is an excerpt and you can click on the link if you want to view the entire story.
(Excerpt Below)
Few markets conjure up as many images from investors as the meat futures markets do. Some people will think of Old West cattle auctions, with cowboys and ranchers bidding on prized bulls. Others know the meat markets are just like any other market, though they still hold on to the notion that it’s exotic and full of risk.
And that’s just bull. (Sorry, couldn’t resist.)
Certainly meats are risky, the same as any market. But they’re also a vital market filled with many opportunities for your portfolio. Of course, you’re not likely to hear about them from your broker. The sad fact is, most analysts on Wall Street only know cattle as it’s served up to them at a Morton’s or Ruth’s Chris Steak House.
Essentially, meats are traded on Chicago Mercantile Exchange. And as I said, all trading is done much the same as any other commodity.
Of course, like all markets, meats have a very unique language. Traders concentrate on data that nobody else looks at.
So all we can do is wait and see how the markets react. Gold is firmer today as the dollar declines and the Euro finds some footing. Gold was only down about $15 yesterday, which these days is a normal range. Hell, when i started in the business in 1989 a $20 move in gold and $5-10 move in oil would have been unheard of. Crude is surging up $1.60 as I write this morning and it is likely on its way to $150 at this rate.
Let’s see dollar lower, oil higher….hmmmm Makes sense to me. Just like i said on CNBC yesterday , see video in yesterdays post below.
One last note, I bought a $100 crude put yesterday for around $500, I figured it is a good hedge and it gives me until September. By the way, I am still long cocoa and sugar, cocoa may be time to grab profits though, no reason to be greedy.
Next week is my birthday (41, ugh) so it will be an early B-day present. The it’s off to Vegas for FreedomFest 2008!
Hey, if you are anywhere near Vegas you must come by the conference or heck swing by the Bellagio and maybe we will meet in the lobby, who knows. Or if you can’t make the conference I am trying to set up a book signing off site of the conference too and will keep you posted.
Ok, check back later today as I am doing a mega RTA Mailbag right here on the blog, I have gotten tons of email so we can only answer a few in any issue and the rest I will do here, be sure to check back today and tomorrow!
What we have going on with energy prices right now is nothing short of a national emergency, and yet no real answers are being discussed. The same political nonsense is spewing from the Obama and McCain camps, and it’s a disaster.
Last night my wife Katrin and I were invited to my friend and CNBC host Larry Kudlow of Kudlow & CO’s house. It was a lovely gathering, a small dinner party at his home, which is near mine, in Redding Connecticut.
Some fine food and conversation were had by all and at the end of dinner a lively debate ensued, I suddenly felt as though I was on Larry’s show and all that was missing were the cameras. I won’t share all of the discussion with you, but I will say that Larry is absolutely right, energy is the most important issue right now. So far McCain has been so wishy-washy it’s hard to know what he will do. Obama is a lot more predictable and if he is elected we will likely have to ride polar bears rather then drive cars.
The extreme environmental movement simply has too much power over the left.
I love the environment as much as anyone but we must wake up and realize that we have a national security crisis and there is no time to waste.
Senator McCain cannot walk the middle path on this issue, he must man up, be bold, and channel some of the Gippers firm stance. Drill, Drill, Drill! Build more refineries, build more nuclear, remove restrictions and red tape and most of all get oil companies and private equity to build more infrastructure (refineries, pipelines, etc.) rather then windfall taxes that will be wasted on more worthless social programs.
All of this can be done intelligently and with absolute protection for the environment, as much as that is possible. The cost of taking the middle ground on this issue will mean years of pain for American consumers, and thus the rest of the World.
As Larry pointed out at dinner, the oil issue could win McCain the election but only if he steps in, steps up and makes it clear that this is what we need to do. The question is will he do it or is the environmental lobby and extreme left more frightening than being in a Vietnam POW camp, maybe they are.
The rain in the Midwest has simply destroyed thousands of acres of prime farmland and it will be months before we will really know the true impact. Now the situation maybe getting even worse as levees burst and the towns and farms near the Mississippi get hit. Forecasts for the region are not good at all and as the water rises so are fears that 2008 could be one of the worst harvests on record.
Water Knee High By July
Corn will most certainly not be “Knee High By July” the water level sure will be though at this rate. Farmers face a massive clean up and then as we get into July and high degree heating days then those corn crops that didn’t get washed away will still have to survive the intense heat, it’s likely going to be disaster part II. At the end of the day the scenario is easy to figure out. Corn prices will surge along with soybeans, bean oil, bean meal etc. Consumers will be faced with even tighter supplies and much higher prices for everything form milk and dairy to chicken and cattle and everything in between. Time to start a vegetable garden. I recently wrote about this situation for my friends at the Daily Reckoning, take a read.
By the way, if you can tell me what fruit this is that I had in my hotel in Dubai a few weeks ago I will give you a prize.
The Daily Reckoning PRESENTS: The days of the 3,000-mile Caesar salad are coming to an end. With diesel prices at record highs, Americans just can’t afford to get their food from all over the country. Something has to change – and soon. Kevin Kerr explores…
INVASION OF THE LOCAVORES
by Kevin Kerr
As you know, Byron and I travel near and far to find the most cutting-edge information on everything from energy and metals to agriculture and emerging markets. We have found that seeing something for oneself is truly the best way to judge what may be the next great investment opportunity.
After all, the guy sitting behind a desk on Park Avenue almost certainly has no idea what is really going on with farmers and what is going on in their heads this year.
I know what is going on inside the heads of the farmers. This spring, I went to visit farms in the Midwest, as I do every year.
It was a Saturday in mid-April when I pulled up to the Miller Armstrong Building in the sleepy farm town of Waseca, Minn. Waseca is also home to a federal penitentiary and Jeff Skilling, former Enron CEO and allegedly one of the “smartest guys in the room.” Now he is a convicted felon, serving time.
I drove into town and watched the cattle grazing outside the prison. I wondered for a moment if those cows knew they had a famous neighbor. They didn’t seem to care. The cows seemed more concerned about where to find some food. It was certainly foreshadowing what I was about to hear from the farmers.
I was greeted by my friend and Outstanding Investments member Geb Singlestad. Geb escorted me to a casual meeting at the Armstrong hall building. Charlie Nedoss of Peak Trading and about 15 other farmers accompanied me. One reporter showed up. Everyone introduced themselves, and we all grabbed some coffee. I spoke with the reporter for a few minutes, and the meeting began.
The thing about small-town America is everyone is friendly, but cautious. Geb invited all these farmers to the meeting. Later on, we learned that most of them thought we were there to sell them something… We were not.
Most of the farmers showed up out of respect for Geb, because he is a sort of patriarch in the community. The meeting was scheduled to last about 45 minutes, but once it got going, we covered so much ground and there were so many questions that we ended up being there for 2½ hours.
The questions came fast and furious. One farmer asked, “Do these people in Washington or in the cities know how much we are paying for our input costs? Do they have any clue how much the farmer is being squeezed?”
The best question of all, in my opinion, was asked a few times. “What will it take? How high will prices have to go to get people to change?”
I said that I think prices will have to go much, much higher before urbanites even consider switching off American Idol and protesting in the street. The farmers realize that most people in the country have no idea about either the process or the cost of what it takes to get their dinner from field to fork.
One farmer belted out, “As long as they have groceries on the shelves, lights on, the ATMs working and their jobs, then all is well. They don’t have a clue.”
There has always been a line between city and suburb dwellers and their rural counterparts. Most people in urban areas have little understanding of how much work goes into generating our food supply and then transporting it to each and every city.
Just the volume of diesel fuel usage to grow the crops is astounding. Agriculture is a very fuel-intensive undertaking. With diesel prices topping $4 and rising, the costs continue to climb at the grocery store.
After our meeting with the farmers, Geb took Charlie and me to see the newest ethanol plant being built in Janesville, Minn. This new structure is a 110 million-gallon ethanol plant. It has several rail lines being built to run directly into the plant. The outside of the building itself is huge. The towering cranes were working full tilt while we were there, and the parking lot was full of workers’ cars. The one thing that neither Charlie nor I saw was a water supply. An ethanol plant uses a huge amount of water, so where will it come from?
It seems with ethanol, as with so many things, the answer from the government often comes after a major project is already well under way. For the last eight years, the Bush administration has seemed to be more likely to do first and fix later. What’s the old saying? “Better to ask for forgiveness than permission.”
Anyway, the ethanol plant has provided many good jobs in the area and is slated to produce a real boom for the local economy. That’s all well and good, but is it sustainable?
In his book The Long Emergency , James Howard Kunstler discusses the 3,000-mile Caesar salad. He discusses how we all have become used to getting our food from all points of the country and world, and how that will need to change. The farmers whom I met with feel the same way.
The days of being able to transport produce and grains across the country are facing such high costs from diesel that it will put them out of reach for many consumers. Sure, people in America are not starving. At least, not yet. But what they are doing is donating less to food banks, and feeding their children watered-down soup and soda, instead of milk.
With egg prices surging 26% and milk prices near record levels, consu
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