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GOLDSEEK RADIO

Kevin Kerr

& Chris Waltzek – Aug. 10, 2010

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KTI Market Notes for Friday July 30th, 2010

Boots on the Ground Report:

Agriculture Conditions

We received an update from the fields from  our “road warrior” John K.   Here is what he writes about the field and crop conditions he is seeing right now.

John Writes:

Hi Kevin…here is the crop info as seen from my truck window going up and into central Michigan….

Lots of variability in the crops from farm to farm.  Thousands of acres of corn and beans that looked just great from the road as you passed by…not able to see into the center of the fields.  Then, an overpass gives you a view not seen from flat ground.   Lots of open, bare ground w/ no crop surrounded by 6 inch yellow corn stalks that grow up and change color as the open hole expands outward.

Beans give you the same picture lots of times.  Many times a re-plant is visible…with many of those drowned out.

Going around the South end of Lake Michigan…lots of flooded areas are plainly visible…too many 2–3–4+ inch rain storms.  Going into Michigan, a lot of farm ground showed no crop…too wet to plant, or even get last years fall tillage work done.  Saw one field that still had last years corn crop in it.

Many farm fields had 2 to 6 inch beans…planted in clean ground.

Saw more than a couple corn fields in Central Michigan with 2 foot to 6 foot corn…taken over by weeds that were as tall or taller than the corn.  Other corn and bean fields with 2 to 5 foot crops of cat tails in most of the water holes.

The storms that pounded Milwaukee and Chicago last week…came right across Lake Michigan and drenched many parts on Michigan.

Only had the opportunity to speak with one cash renting farmer, he said he will probably break even with this years crop.  That means he’ll work for free.  OUCH!!

I’ll be going to Milwaukee in one week.  I’ll let you know what I see.

KTI  Road warrior .. John K, Peoria Illinois

Also, several of our other positions such as sugar, have been moving swiftly into profit territory.  Your March Sugar call has gone about 40%+ and the October (which was almost down to -90% has now just about back to break-even and possibly ready to go profitable, an amazing recovery in a very short time.

Both the October Sugar and the Canadian Dollar trades are losing time value quickly though.  Remember the October sugar options go “off the board” in early September.  So time is of the essence.  It is also a reminder of just how quickly commodities options can move.

Also, the Canadian Dollar position is offering us an opportunity to recoup some equity and this trade is at critical resistance levels.  Take a look.

Be on the lookout for any trading updates as well as other big announcements about our new media and educational products and partnerships aimed toward the commodities and resource investor who wants to take charge of their own financial destiny, all this and more from KTI next week.

For Media Bookings & Broadcast in the US & Abroad, Please contact Karen Terwilliger at media@kerrtrade.com 203-559-7247 or 203-403-2552

You may have heard the news in the last two days about the Deepwater Horizon drilling rig which caught fire, burned for two days, then
sank in 5,000 ft of water in the Gulf of Mexico. There are still 11 men missing, and they are not expected to be found.

The rig belongs to Transocean, the world’s biggest offshore drilling contractor. The rig was originally contracted through the year 2013 to BP and was working on BP’s Macondo exploration well when the fire broke out. The rig costs about $500,000 per day to contract.

The full drilling spread, with helicopters and support vessels and other services, will cost closer to $1,000,000 per day to operate in the course of
drilling for oil and gas. The rig cost about $350,000,000 to build in 2001 and would cost at least double that to replace today.

The rig represents the cutting edge of drilling technology. It is a floating rig, capable of working in up to 10,000 ft water depth.

The rig is not moored; It does not use anchors because it would be too costly and too heavy to suspend this mooring load from the floating structure. Rather, a triply-redundant computer system uses satellite positioning to control powerful thrusters that keep the rig on station within a few feet of its intended location, at all times. This is called Dynamic Positioning.

The rig had apparently just finished cementing steel casing in place at depths exceeding 18,000 ft. The next operation was to suspend the well so that the rig could move to its next drilling location, the idea being that a rig would return to this well later in order to complete the work necessary to bring the well into production.
It is thought that somehow formation fluids – oil /gas – got into the wellbore and were undetected until it was too late to take action.

With a floating drilling rig setup, because it moves with the waves, currents, and winds, all of the main pressure control equipment sits on the seabed – the uppermost unmoving point in the well. This pressure control equipment – the Blowout Preventers, or ‘BOP’s” as they’re called, are controlled with redundant systems from the rig. In the event of a serious emergency, there are multiple Panic Buttons to hit,
and even fail-safe Deadman systems that should be automatically engaged when something of this proportion breaks out.

None of them were aparently activated, suggesting that the blowout was especially swift to escalate at the surface. The flames were visible up to about 35 miles away. Not the glow – the flames. They were 200 – 300 ft high. All of this will be investigated and it will be some months before all of the particulars are known. For now, it is enough to say that this marvel of modern technology, which had been operating with an excellent safety record, has burned up and sunk taking souls with it.

The well still is apparently flowing oil, which is appearing at the surface as a slick. They have been working with remotely operated vehicles, or ROV’s which are essentially tethered miniature submarines with manipulator arms and other equipment that can perform work underwater while the operator sits on a vessel. These are what were used to explore the Titanic, among other things. Every floating rig
has one on board and they are in constant use. In this case, they are deploying ROV’s from dedicated service vessels.

They have been trying to close the well in using a specialized port on the BOP’s and a pumping arrangement on their ROV’s. They have been unsuccessful so far. Specialized pollution control vessels have been scrambled to start working the spill, skimming the oil up.

In the coming weeks they will move in at least one other rig to drill a fresh well that will intersect the blowing one at its pay zone. They will use technology that is capable of drilling from a floating rig, over 3 miles deep to an exact specific point in the earth – with a target radius of just a few feet plus or minus. Once they intersect their target, a heavy fluid will be pumped that exceeds the formation’s pressure, thus causing the flow to cease and rendering the well safe at last. It will take at least a couple of months to get this done, bringing all available technology to bear.

It will be an ecological disaster if the well flows all of the while; Optimistically, it could bridge off downhole.
It’s a sad day when something like this happens to any rig, but even more so when it happens to something on the cutting edge of our capabilities. The photos that follow show the progression of events over the 36 hours from catching fire to sinking.

Taking Stock with Bloomberg’s Pimm Fox Tuesday May 4th, 2010

http://media.bloomberg.com/bb/avfile/Markets/Analyst_Calls/v9gKGyeCbkoY.mp3

www.marketwatch.com/story/us-refiners-suffer-oil-product-imports-may-grow-2010-01-08

Caught me off guard, demand in China was about 7.8 million in 2007 but I believe the actual number is higher more like 9 million, this guy says 8, whatever. Growth will be far more than 10% and $50 oil is a joke, if it gets there buy all you can. Watch.

Good Morning. I hope you all had a fantastic Thanksgiving holiday or a nice weekend if you don’t celebrate Thanksgiving. Plenty of action last Friday as the markets reacted to the news that Dubai World, the large investment faction in Dubai, was requesting a 6 month stay of payments on their debt..Yikes. But was it really unexpected? I spoke to Charly Butcher of WOWO radio this morning..

It’s funny but it’s been about a year since I was over there last andI spoke to CNBC Arabiya in Dubai the last time and the topic of Dubai’s growth came up. The interview is in Arabic so unless you can speak it the interview may be a bit useless, but you can watch it here anyway.

I was in Abu Dhabi and Dubai a year ago or so speaking at a conference as well as in private meetings with bankers, investors and others.

Even back then the cracks were starting to show and just seeing the shear size and amount of growth as daunting. I will have a complete laundry list of just what kind of growth Dubai has experienced in today’s Commodity Confidential. If your not getting the Commodity Confidential please be sure to visit the front page of our website and sign up, Commodity Confidential is FREE so you have nothing to lose.

Now, we want to welcome Ms. Natashca Niffka, our new Senior Markets Strategist and Director of Business Development at KTI, Natascha shares some Monday morning thoughts and some great story links for you.

BY Natashca Niffka

Can Dubai be put in perspective?

MICHAEL SANTOLI from Barron’s on-line thinks so.

“Dubai was the global equivalent of the most profligate developer in Las Vegas succumbing to excess debt and outsized ambitions; its troubles simply were not a huge surprise.”
The sell of Merrill Lynch: a surprise.

To read the entire article:

http://online.barrons.com/article/SB125935218906166855.html?mod=BOL_hpp_dc

What does this mean to all business in general?

For the time being, it appears there will be a short term sell-off, not any different to the short-term outlook stated by Kevin Kerr weeks before the Dubai news came out.

Banks will continue their due diligence, and lending to small businesses will continue to be tough.

VIKAS BAJAJ and GRAHAM BOWLEY wrote in nytimes.com Sunday,

November 29, 2009

“Dubai’s problems could also be a boon for some emerging economies, like India, Brazil and China, that are not heavily indebted to overseas investors and which have large populations that are buying more goods and services. Investors have been pouring billions of dollars into those countries in recent months and are likely to increase their allotment to them as they shift away from financially troubled countries.”

Brazil’s recent strength is no new news and India’s already been gobbling up gold reserves well before the Thanksgiving Holiday.

To read the entire article:
http://www.nytimes.com/2009/11/30/business/global/30dubai.html?_r=1&hp

For Kerr Trading International, I am Natashca Niffka. Thoughts, opinions? I would love to hear them. Drop me a note at nnn@kerrcommoditieswatch.com

Meanwhile…I spoke to Dunstan Prial over at Fox business on Friday. Read On.

Cooler Heads Should Prevail in Dubai Debt Mess

By Dunstan Prial
FOXBusiness

The revelation of Dubai’s debt mess rattled already easily rattled U.S. markets on Friday, dropping as it did into a news vacuum on a traditionally slow trading day.

“It shows that this is not a clear recovery. Things are more complex than that,” he said. “The Fed will keep interest rates low and continue to print money because there are still a lot of issues out there.”