Hog Futures Slammed on Weak Demand, Larger Supply

Bad Economic Omen: Crude Slips Into Contango

from Bloomberg News

"Front-month Brent crude settled lower than the second-month contract for the first time since June on concern that slower economic growth will reduce near- term demand.
"'The contango is an indication that the economy is in bad shape and oil demand is really slowing,' said Rich Ilczyszyn, chief market strategist and founder of commodities trading firm Iitrader in Chicago. 'There is probably more downside risk going forward.'”

Stocks Erase All Jobs Announcement-Related Losses

Clearly, the mentality on Wall St is to view this news today as aberration, rather than indication, of economic direction.

The Difference Between Speculation and Investment

"...investment is buying a security at a price that is associated with a reasonable expectation of acceptable long-term returns. Speculation is buying a security in the expectation that its price will advance, with less regard for long-term prospects. Both benefit from solid valuation methods and reliable measures of market action, but investment weighs valuation more strongly, while speculation weighs market action more strongly. The problem for active market participants is to distinguish between investment and speculation in the first place, and then to identify good and bad opportunities to accept such positions." John Hussman, Phd.

Poor Jobs Creation Craters Stocks

What's Wrong With This Picture?

This picture is a screen cap of the headline on the website of the Wall St Journal overnight. The news out of Europe is AWFUL! SIX straight quarters of economic contraction!

And yet the stock market futures ROSE about 50 points overnight on this news! Stocks continue near all-time highs, having reached fresh all-time record highs in 2 of the 4 previous days! What gives?


The Fed and other central banks are so busy propping up the stock market that they have removed all perception of risk from the market! Market participants routinely disregard all news and data (like this headline), analysis, and risk. They simply don't care any more about the "real" economy, because they are so addicted to easy money from the Fed that the "real economy" has become irrelevant to them. 

Central bankers have created moral hazard, and done so intentionally, to benefit the wealthiest people in Western civilization! We know this because studies have repeatedly shown that the vast majority of stocks are owned by the wealthiest people in our society. So the Fed is engaging in its own stimulus plan to boost the wealth of the already-wealthiest members of civilization! And this stimulus plan has been ongoing now for FIVE YEARS -- NONSTOP!

This is a textbook case of a bubble! But now, Ben Bernanke is not only doing it intentionally, but boasting about it as well!

No Saving This One Today!

Stocks Slip On Dour News

Dow down 100 points.

excerpt from the Wall St Journal:
Stocks extended losses after the Institute for Supply Management's reading on the U.S. non-manufacturing sector came in worse than expected—slipping to its lowest level since August 2012—and employment slowed as well.
A disappointing report on private-sector jobs growth for March also cast a pall on Tuesday's optimism. Data compiled by Automatic Data Processing and Moody's Analytics showed an increase of 158,000 jobs on the month, well below the 192,000 expected.

Futures Daily for April 3, 2013

Morose Chicago PMI -- Actual Screen Capture

As Chicago PMI Crumbles, Stocks Reach New Record Highs

More On Grain Forecasts, Supplies

from Agrimoney.com:

Corn futures plunged the exchange limit in Chicago, with soybean and wheat prices falling too, after the US said that its stocks of all three crops were larger than had been thought, easing concerns over tight supplies.

The US Department of Agriculture added to ideas of an easing in the corn supply squeeze by pegging domestic sowings of the grain at 97.3m acres, a little above market expectations, and the largest area since 1936.

The USDA said that US corn inventories as of the beginning of the month had fallen to 5.40bn bushels, down some 600m bushels year on year, but well above the figure that investors had expected following last year's drought-hit harvest.

Grains Get Creamed Following USDA Report

Corn is limit down, wiping out all of March gains in ten minutes. Soybeans and wheat are also down sharply. Corn and wheat are both down more than 5% in the past few minutes. I was fortunate to get fills without a loss!

 Soybeans:

from Bloomberg:
U.S. farmers will sow fewer acres with soybeans this year, the government said, surprising analysts who were expecting a gain. Corn will get the most acreage since 1936, the U.S. Department of Agriculture said.
About 77.126 million acres will be sown with soybeans, down 0.1 percent from 77.198 million a year ago, the USDA said today in a report based on a survey of farmers. Analysts in a Bloomberg survey were expecting 78.351 million. Corn acreage will reach 97.282 million, up from 97.155 million last year, the agency said. The average analyst estimate was 97.339 million.
Soybean plantings fell in Minnesota, the third-biggest grower, and in every Great Plains state except North Dakota, offsetting increases in Iowa and Illinois, the two top producers. Prices for corn and soybeans are up this year, making the crops attractive for farmers who hope to replenish stockpiles after drought curbed production last year.
“If you have good yields, corn and beans are the best cash crops,” Mike Zuzolo, the president of Global Commodity Analytics & Consulting in Lafayette, Indiana, said in a telephone interview. “The drought fears are being pulled out now as we get more moisture across the U.S.”

Futures Daily for March 28, 2013

Today's big movers are cocoa, cotton (both bullish), and corn (bearish).

Cotton Climbing Again

Stocks Reach New Highs Even As Economic Data Continues Weak

Q4 GDP was revised slightly higher this morning, but was worse than expected, coming in at .37%. Initial claims for unemployment was disappointing also, with a rise this week. Both are being dismissed, and stocks are higher.

Strained Relations

Futures Daily for March 25, 2013

Reversals in nearly all of Friday's calls, mostly due to circumstances in Europe. This is strong evidence of the interconnectedness of the financial markets, and especially of the influence of easy QE money from the Fed and other central bankers.

Futures Daily for March 22, 2013

Looking to buy coffee, sell corn, buy the Euro, sell the USD, buy crude.

Nat gas looking bearish, but not ready yet to sell. Wheat volume looking like it may turn over soon. Copper looking bullish despite ample supplies, especially in Asia.

Lean hog buy was confirmed.

Stocks Back Near Record Highs

Despite the ongoing European debt crisis, stocks closed near all-time record highs again.

German Business Confidence Drops

ECB's Ultimatum of Plunder

If central bankers can get away with this in Europe, where can't they do it? It is just the "collectivization" of the fruits of all peoples' labors world-wide!

FOMC Minutes Boost Stocks

So what else is new?

Futures Daily for March 20, 2013

Today's big movers include cocoa, orange juice, cotton, copper, wheat (and other grains).

Commodity HQ: Great Commodity Professors

When it comes to commodities, most investors turn to the likes of Jim Rogers and George Soros, legendary gurus that have long held the spotlight in this asset class. And while their contributions to the commodities world have certainly helped shape the market we know today, there is one group of individuals that is often overlooked, though they have continually played a major role in the natural resources market: professors [sign up for our free commodity newsletter here].
These professors have not only helped our understanding of the often complex commodities market, they have also been pioneers in the field, allowing investors of all walks to look at the space from a different perspective. For those wondering who exactly is behind the commodity-focused academia scene, we highlight several accomplished commodity-friendly professors (in no particular order):
[If you're an commodity friendly professor, drop us a line and let us know a bit about your work; we'd be happy to add you to the list.]
1. Campbell R. Harvey
In addition to being a finance professor at the Fuqua School of Business at Duke University, Campbell R. Harvey is a Research Associate of the National Bureau of Economic Research. His blog Garden of Econ is a great resource for investors wanting a macro perspective.

• University: Duke University
• Specialties: Portfolio Management, Asset Allocation, Global Risk Management
• Academic Work: The Golden Dilemma

2. Craig Pirrong

Craig Pirrong is a professor of finance and Energy Markets Director of the Global Energy Management Institute at the Bauer College of Business at the University of Houston. Pirrong’s blog Streetwise Professor is packed with key insights every commodity trader should read.

• University: University of Houston
• Specialties: Economics of Derivatives Markets and Risk Management.
• Academic Work: Searching for the Missing Link: High Frequency Price Dynamics and Autocorrelations For Seasonally Produced Commodities

3. Roger Dahlgran

Roger Dahlgran is a professor at the University of  Arizona and is an expert of econometric modeling of futures markets, particularly agricultural markets. He has also received awards and recognition for his development and use of futures trading simulation software.

• University: University of Arizona
• Specialties: Econometric Modeling, Futures-Market Price Behavior, Agricultural Markets
• Academic Work: Ethanol Futures: Thin but Effective? – Why?

4. Colin Carter
Colin Carter is a professor at the University of California, Davis and the Director of the Giannini Foundation of Agricultural Economics. Carter has done extensive research on China’s grain market and international trade, and has a new book out “Futures and Options Markets“.

• University: University of California, Davis
• Specialties: Commodity Markets, Agricultural Trade, International Trade
• Academic Work: Commodity Booms and Busts

5. Ke Tang

Ke Tang is a professor of finance in the Hanqing Advanced Institute of Economics and Finance and School of Finance at the Renmin University of China. His work in commodity markets and asset pricing models is well noted in both the academic and financial communities.

• University: Renmin University of China
• Specialties: Commodity Markets, Chinese Stock Markets, Continuous-time Asset Pricing Models
• Academic Work: Index Investment and the Financialization of Commodities

6. Wei Xiong

Wei Xiong is a professor of economics at Princeton University and a Research Associate at the National Bureau of Economic Research. His work on the “Financialization” of commodities with Professor Ke Tang is widely referenced in many recent policy discussions and public debates of commodity futures markets.

• University: Princeton University
• Specialties: Financial Economics
• Academic Work: Feedback Effects of Commodity Futures Prices
  

7. Scott H. Irwin

Scott H. Irwin is a professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. He is recognized as a national and international leader in agricultural economics, and his works are frequently cited by other academic researchers, policy-makers, and the media.

• University: University of Illinois at Urbana-Champaign
• Specialties: Agricultural Price Analysis and Forecasting, Commodity Futures and Options Markets, Price Risk Management
• Academic Work: Measuring Index Investment in Commodity Futures Markets

8. David A. Bessler

David A. Bessler is a professor of agricultural economics at Texas A&M University. Bessler is noted for his contributions in time series analysis of agricultural markets, out-of sample forecasting for model assessment and policy, and the use of algorithms on inductive causation.

• University: Texas A&M University
• Specialties: Applied Decision Analysis, Price Dynamics, Agricultural History
• Academic Work: Asset Storability and Price Discovery in Commodity Futures Markets: A New Look

9. L. Alan Winters

L. Alan Winters is a professor of  economics at University of Sussex and former Program Director of the Centre for Economic Policy Research in London. He is one of the world’s leading specialists on empirical and policy analysis of international trade and development.

• University: University of Sussex
• Specialties: International Trade, International Labor Mobility, Agricultural Protection
• Academic Work: Distributional Effects of WTO Agricultural Reforms in Rich and Poor Countries

10. Alex Winter-Nelson

Alex Winter-Nelson is a professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. The professor has done extensive research on food and cash crop marketing in Africa, as well as the relationship between agricultural technology and nutrition.

• University: University of Illinois at Urbana-Champaign
• Specialties: Agricultural Technology, Cash Crop Marketing in Africa
• Academic Work: Purpose and Potential for Commodity Exchanges in African Economies

11. Philip Garcia

Philip Garcia is a professor in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. Professor Garcia has more than 200 research publications focusing on agricultural economics, including 100 journal articles, 11 book chapters, and 90 published proceedings and abstracts.

• University: University of Illinois at Urbana-Champaign
• Specialties: Marketing and Price Analysis, Futures and Options Markets, Risk Management, Econometric Modeling of Feed-Livestock Markets
• Academic Work: New Evidence on the Value of Public Information in Commodity Markets

12. Jian Yang

Jian Yang is a professor of finance at the University of Colorado’s Business School in Denver. Yang’s work has been cited by the World Bank, the U.S. Commodity Futures Trading Commission, the Federal Reserve Bank of St. Louis, as well as many other notable names in the industry.

• University: University of Colorado, Denver
• Specialties: International Finance, Time Series Econometrics, Futures Markets
• Academic Work: Futures Trading Activity and Commodity Cash Price Volatility

13. Terry Roe

Terry Roe is a professor in the Department of Applied Economics at the University of Minnesota. Professor Roe has consulted various organizations regarding agricultural economics, including the World Bank, USDA/ERS, USAIS and the European Commission.

• University: University of Minnesota
• Specialties: Agricultural Development and Policy, International Trade, Macroeconomics, Regional Economics
• Academic Work: Measuring Commodity Price Volatility and the Welfare Consequences of Eliminating Volatility

14. Parantap Basu

Parantap Basu is a professor of macroeconomics at Durham University’s Business School and is the Director of the Centre for Economic Growth and Policy. Professor Basu was also a member of the scientific committee for advising the European Commission during 2010 to 2011

• University: Durham University
• Specialties: Asset Pricing, Business Cycles, Growth and Inequality.
• Academic Work: What Explains the Growth in Commodity Derivatives?

15. Helyette Geman

Helyette Geman is a professor of finance at Birkbeck, University of London and is the Director of the Commodity Finance Centre and John Hopkins University. Geman has published numerous books about commodities, and has been an advisor to major banks, energy and mining companies as well as commodity houses.

• University: University of London
• Specialties: Quantitative Methods, Systematic Trading, Energy, Metals, Agriculture, Risk
• Academic Work: Forward Curves, Scarcity and Price Volatility in Oil and Natural Gas Markets

Stocks Continue to Sag

Soft Stocks

More Trouble in Euroland

I was particularly intrigued by Russia's righteous outrage. What pound of flesh will they seek to extract? If they do, they will be justified in their "criticism".
I was also struck by that little tiny "Europe's Debt Crisis" headline at the bottom right. It would be very easy to miss or even dismiss! 

Stocks Continue Obliviousness to Risks

After being down 150+ points, the Dow is now back to flat for the day. Central bankers have effectively eliminated all perception of risk from the financial markets.

Farmland -- A Better Investment Than Stocks!

A 10% to 15% increase in value every year has made farmland an enticing investment opportunity, especially when compared to an equities sector that's had trouble returning much of anything to investors. This dynamic has caused many investors to question which market's the safest place for their money: Land or stock.
Up until about the last 6 months, the last 5 years have been devastating to the stock market. But, the recession's faded and stock prices have rebounded. 
"Iowa farmland values have shown yearly increases for 11 of the past 12 years. The values remain at record high levels where they have been for the past 9 years. Iowa land values have increased by double digits eight of the past 9 years. This year marked the third consecutive year that values have increased more than 15%. The estimated land values have increased more than 2 1/2 times since 2003," says Iowa State University Extension ag economist and farmland values expert Mike Duffy. "The composite value of the stock market, as measured by the Standard & Poor’s Index (S&P) average, has started recovering from the disastrous 2008 year. Even though the S&P lost 34% of its value between 2000 and 2008, its overall record has been impressive since 1990. Stock values rose from 328.75 in 1990 to a December 2012 close of 1,422.29, an increase of over 300% in spite of the decline in 2008."
Investment variables
So, which is the best place for your investment dollars? There are a lot of moving parts to the equation, and it requires a few assumptions on price direction and how returns for both markets will be gleaned, whether through capital gains, dividends or other means.
"The returns to land or stock shares are composed of two parts. The first is capital gains or the in­crease in value. Obviously, this also could be a capital loss if values decrease. The second component is yearly returns," Duffy says. "Owning land has an unavoidable annual ownership cost not associated with stocks. Property taxes must be paid and should be included in a comparison of owning stocks or farmland. Additionally, if farmland is held as an investment and not by an owner-operator, there could be a professional farm manager involved and the fee for this service would have to be considered. There is also a need for some maintenance and insurance with farmland not associated with owning stocks."
All of these add up and, though land's still a strong spot for investment money, they chip away at total land returns, Duffy adds. "Land taxes, a management fee, insurance and maintenance are the only ownership costs considered for land. There is no ownership cost assumed for stocks," he says.
Wildcards looking ahead
There's been a lot of speculation over the last few months about whether land values have reached their tipping point and will start to decline soon, especially among the growing thought that today's high commodity prices -- the primary factor underpinning today's land market -- will slip based on expectations for a big crop this year.
"The value of land is determined by its income earning potential. For the most part, in Iowa, that means the returns to corn and/or soybeans. Returns will be influenced by a number of factors over the next several years," Duffy says. "Oil prices, ethanol prices, crop yields, costs of production, economic recovery, alternative biomass sources, and a host of other major issues will have an influence on the price of land."
THat could have land price implications in the shorter term; changing landowner demographics, however, could affect the viability of land as an investment vehicle in the longer term, Duffy says.
"In 1982, 12 percent of the farmland in Iowa was owned by someone over 75 years old. By 2007, this percentage had more than doubled to 28%. In 2007, over half, 55%, of the farmland in Iowa was owned by someone over the age of 65. How this land will be transferred from one generation to the next is not entirely clear at this time. It appears that the majority of it will be passed on to the children, usually in equal shares. This means there will be more landowners and more out of state owners," Duffy says. "Whether they will they want to continue to own the land or sell it is unknown. Too much land being offered for sale is not a problem at this time, but it could become one if the next generation doesn’t want to hold on to the land."
All the variability doesn't lie on the farmland side, though. There's just as much potential volatility in the equities, especially considering there's still a lot of economic uncertainty around the world.
"The performance of the stock market for the next few years is also not clear. The U.S. stock market will be impacted by what happens in the European Union and China among other places in the world. We are no longer insulated from the economic conditions throughout the world," Duffy adds. "The imbalance of trade is another area of uncertainty with respect to possible impacts on the U.S. economy and the performance of the stock market and the land market."
The verdict
All things considered, there's still a lot of promise in the farmland market for investment. It's been strong in the last few years, though there's a lot of uncertainty looking ahead -- much more so than in recent years, Duffy says. And while the answer's not clear-cut or simple, farmland will remain a strong contender for investment potential in at least the short term.
"Land and the stock market are different types of investments and assets. This simple comparison was based strictly on averages. There are a number of individual stocks that perform better than the S&P. But there are some that don’t perform as well. Anyone contemplating the question of which is a better investment needs to know his or her goals," Duffy says. "Land’s performance relative to the stock market over the past few years has been spectacular. Will this trend continue? Time will tell. Which is the better investment? As the old saying goes, timing is everything in the success of a rain dance."

Fed's Easy Money Worries Economists

Fresh Turmoil in Europe Causes Stocks to Gap Lower

Dow is down 120 points in evening trading.