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12-02-2012 10:12 PM
Grain markets. Are we finally past harvest lows and the November doldrums?
Fundamentals of a world of short crops over the last year and a half starting to assert it's self?
Marketeye's making us aware of +$18 Brazil bean prices and Bunge's survey starting @ $16 starting the rise to crop shortage's and the start of prices that will ration the remaining supplies?
12-03-2012 05:49 AM - edited 12-03-2012 06:06 AM
Interesting post hobby - This is the beginning of a E-mail i got from a good friend last night -
we will see if global rationing has to take place-most countries are hell bent on making sure they dont have any of this "high" price grain left in stock that is for sure-gotta sell the inverses.
This was on wheat
Lets look here Egypt bought U.S. wheat -- first of this year = Black sea is all but out , Argy is halting new crop wheat licensing .
I have read that the Ukraine and even Russia have borrowed some good coin from ?? China and part of the repay deal was to be in ?? yes -- grain , So with that said , remeber the old saying -- make hay while the sun shines ? The Ukraine keeps saying they are out or i should say they are not going to export any more wheat but keep kicking the candown the road , why not ? it is paying there loan of quicker . No big deal , they will just buy cheaper NEW wheat , problem for me is where isthe new wheat comeing from ?
Boy's you know better than me the U.S. wheat is pretty poor , if it's not there in the start , it sure is not going to be there in the end .
So it looks like somebody may have to wait till --what ? next July , Aug. or longer till new crop comes in ?
Should be interesting to see if they start comeing here in the very near future for there needs -- better pull them belts one more time .
12-03-2012 06:29 AM
The Olivera-Tanzi Effect
" the so called Olivera-Tanzi effect postulates that as inflation rises, access to working capital is restricted and firms delay their tax payments, to get them devalued by inflation."
Why fiscal austerity would be irrelevant without a surplus - Zero Hedge
A logical outcome, which I think is clear from the two scenarios above, is that no matter how far the spending cuts go, the only way to compensate for the monetization of EXISTING INVENTORY of US Treasuries, is to reach a fiscal SURPLUS. Being only frugal won’t cut it!
In order to avoid being dragged to double digit inflation, there will have to be a fiscal surplus to offset the quasi fiscal deficit of the Fed. However, the implementation of austerity measures (i.e. spending cuts), will necessarily lead to a decrease in activity which would only be temporary if the same are accompanied by a widespread liberalization of markets. It is possible but unlikely, for reasons beyond the scope of this post. All sorts of negative feedback mechanisms could be triggered in this situation, only enhancing the repudiation of the US sovereign debt and the resolve of the Fed to monetize it (For instance, the so called Olivera-Tanzi effect postulates that as inflation rises, access to working capital is restricted and firms delay their tax payments, to get them devalued by inflation. The government therefore receives depreciated tax revenue while its operating costs increase, facing deficits that need to be further monetized, thereby fueling even higher inflation).
In Argentina, this negative feedback was always resolved with the plain confiscation of citizens’ assets: Savings accounts in 1989, chequing accounts in 2001, pension funds in 2008, etc. (I can’t stress enough how important it is for anyone in the financial markets today to study the monetary developments in Argentina between 1972 and 1991)
Policy makers look the wrong way
The natural reaction from policy makers, so far, has not surprised me. Rather than addressing the source of the problem, they have and continue to attack the symptoms. The problem, simply, is that governments have coerced financial institutions and pension plans to hold sovereign debt at a zero risk-weight, assuming it is risk-free.
This problem truly brings western civilization back to the time of Plato, when there was nothing “…worthy to be called knowledge that could be derived from the senses…” and when “…the only real knowledge had to do with concepts…”. In the view of policy makers, the statement “the probability of US sovereign default is zero” is genuine knowledge, but a statement such as “The US government needs to issue about $100 billion per month to finance its fiscal deficit” is so full of ambiguity and uncertainty that it cannot find a place in their universe of truths…(Note: I am paraphrasing Bertrand Russell here. I am certainly not erudite)…and just like since the beginning of the 17th century almost every serious intellectual advance had to begin with an attack on some Aristotelian doctrine, I fear that in the 21st century, we too will have to begin attacking anything supporting the belief that the issuer of the world’s reserve currency cannot default, if we are ever to free ourselves from this sad state of affairs. The following paragraph, from a speech by Paul Tucker (currently Deputy Governor at the Bank of England) says it all:
“…Two strategies come to mind which I am airing for debate. The first would be ‘recapitalizing’ the CCP (i.e. central clearing counterparty) so that it can carry on. The second would be to aim to bring off a more or less smooth unwinding of the CCP’s book of transactions…” P. Tucker, Bank of England, “Clearing houses as system risk managers”, June 2011
Policy makers then believe in recapitalization and coercive smooth unwinds. With regards to recapitalization, I will just say that we are not facing a “stock”, but a “flow” problem. US Treasuries would be repudiated because of fiscal deficits, which are flows. No matter how capitalized a clearinghouse is, once the repudiation starts, the break-up of the repo market and the short squeeze would unfold and develop. Whether there is or not a capital buffer is irrelevant to the problem. In fact, in my view, it would be better that there wasn’t: Why would you want to add more resources to a lost cause?
With regards to smooth unwinds, I think it is obvious by now that the unwind of a levered position cannot be anything but violent, like any other lie that is exposed by truth. Establishing restrictions to delay the unmasking would only make the unwinds even more violent and self-fulfilling. But these considerations, again, are foreign the metaphysics of policy making in the 21st century.
12-03-2012 08:36 AM
The following is from the bunge website ...
7:30 Outlook Commentary
by: Jody Lefcourt
Welcome to the new month of December. Or.....is it really December? Because it feels more like March or April. While we much appreciate the escape from winter, the dryness across the middle of the country is worrisome. Can't shake the nagging feeling that we will pay for this nice weather in the end - somehow. And if looking at the latest weather runs, wheat conditions look to be declining on the lack of precip in Texas, Oklahoma, and Kansas. River levels on the Mississippi are low, and we continue to try to deal with barge transportation issues. More reliance could come to the Ohio River facilities. Logistics continue to get moved around - cash markets remain firm.
Today we appear ready to continue our rally from the end of November. While weather in the US is dry in the middle of the country, it is too wet in Argentina, a trend that has been in place for quite awhile as well. Wheat is deteriorating in terms of quality in Argentina. Planting delays in Argentina will continue, which suggests that all the corn in the shed may not get planted in the ground.
Technically the market is stepping up its gains. Pullbacks are being met by buying activity. We are finding that support points are becoming more clear and developed, while pullbacks against upper resistance levels are constantly being challenged. This is net positive for price action. The business announcements are continuing to print, and all in all it adds up to a market that is ready to move higher, albeit ever so slowly.This weekend, Egypt tendered for US wheat, which is adding to support today.
We have enough weather uncertainties combined with technical signals to sustain the higher values for open outcry. Technicals are becoming more positive - producer selling over the market light.
12-03-2012 12:17 PM
was a nice start but won't be a good close if wheat and corn close in the red..............beans also off the highs..........looks like the 200 day moving average is tough resistance on the beans..............
poor export shipments for wheat and corn..............good on beans but that isn't new