Thursday, 12 May 2016

Commodities – Inflation Ahead?

Baltic Dry Index. 579 -15      Brent Crude 45.73

LIR Gold Target in 2019: $30,000.  Revised due to QE programs.

Brexit odds checker.

Brexit Quote of the Day.
Dodgy Dave Cameron: leader of the nattering nabobs of Brexit negativism.

With apologies to Spiro Agnew.

Are commodities starting to signal the return of inflation ahead? I know that the commodity story of the last two years has been the China bust and with it the collapse of the last decade’s Commodities Supercycle. But this old dinosaur commodities trader thinks he’s starting to see a sea change. The tide might have just stopped going out and started returning again. If inflation is about to return from all the money printing, all present investment assumptions are wrong. The Great Nixonian Error of fiat money will detonate in an explosion of monetary inflation heard all around the planet. 

Singer Says Gold Rally Just Beginning as Goldman Sees Losses

May 11, 2016 — 2:01 AM BST Updated on May 11, 2016 — 11:03 AM BST

Billionaire hedge fund manager Paul Singer said that gold’s best quarter in 30 years is probably just the beginning of a rebound as global investors -- including Stan Druckenmiller -- weigh the ramifications of unprecedented monetary easing on inflation.
“It makes a great deal of sense to own gold. Other investors may be finally starting to agree,” Singer wrote in an April 28 letter to clients. “Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies.” 
Gold for immediate delivery rallied 16 percent in the first three months of the year, the biggest quarterly surge since 1986, as the Federal Reserve refrained from tightening and central banks in Europe and Japan pressed on with negative interest rates. Druckenmiller, the billionaire investor with one of the best long-term records in money management, said last week gold is his largest currency allocation and the bull market in stocks was exhausted.
If investors’ confidence in central bankers’ “judgment continues to weaken, the effect on gold could be very powerful,” Singer wrote in the letter. “We believe the March quarter’s price action could represent something closer to the beginning of such a move than to the end.”

Spot gold has rallied 20 percent this year, trading at $1,272.59 an ounce at 6:02 a.m. in New York, as investors poured funds into bullion-backed exchange-traded products. The commodity, which dropped for the past three years, remains more than 30 percent below its September 2011 high.

Singer’s outlook contrasts with the view from Goldman Sachs Group Inc. While the New York-based bank revised its bullion forecasts higher in a May 10 note, its commodity team including Jeffrey Currie still expects weaker gold prices over the next 12 months.

Prices for this commodity have climbed 25% year to date

Published: May 11, 2016 3:26 p.m. ET

Soybean production in South America has suffered because of weather issues; China’s appetite has ballooned

Soybean futures have been on quite a run this year, boasting one of the biggest percentage gains among major commodities year to date.

Growing evidence that there is not enough of the widely used legume to meet growing demand has supported its recent rally.

Soybean futures SN6, +0.44%  settled at about $10.78 a bushel, down 0.5% Wednesday, after rallying by 5.6%, hitting technical trading limits after a price surge a day earlier. Year to date, soybean futures are up by nearly 25%.

The U.S. Department of Agriculture’s World Agricultural Supply and Demand Estimates report issued Tuesday showed that ending stocks of soybeans for the 2016/2017 crop year is forecast at 305 million bushels, down 95 million bushels from the revised 2015/2016 crop year projection. Ending stocks are what’s left over at the end of the year after taking into account all the supply-and-demand factors.

The WASDE report “showed an unexpected dramatic reduction of projected soybean ending stocks, mostly due to demand that is at record levels on a global basis,” which is what likely caused Tuesday’s price spike, said Sal Gilbertie, president and chief investment officer at Teucrium Trading LLC.

On Tuesday, soybean futures hit the trading limit imposed by the CME before settling up 5.6%, at $10.84 a bushel—the highest session finish since August of 2014.

China Eats So Much Pork These Feed Producers Became Billionaires

May 11, 2016 — 10:03 PM BST
China’s appetite for meat has made billionaires out of two of the country’s largest animal-feed providers.
Bao Hongxing, chief executive officer of closely held Twins Group Co., China’s fifth-largest animal-feed producer, has a $1.8 billion net worth, according to the Bloomberg Billionaires Index. Chen Yuxin, founder of closely held Sichuan Tequ Investment Co., Sichuan province’s biggest animal feedmaker, has a fortune valued at more than $1 billion.

The two tycoons are benefiting from growing demand for healthier livestock as the world’s most populous nation, which is no stranger to food scandals, prods farmers to provide higher-quality pork, chicken and beef. The country’s also seeking to reduce its dependence on cheaper, low-protein staples such as rice, corn and soybeans.

“It is impossible to lose money in the animal-feed industry in China right now, unless you have an internal management problem,” said Wang Qian, a Shanghai-based agriculture analyst at Guotai Junan Securities Co. “Fewer than 20 percent of China’s livestock farming companies make their own feed and are self-sufficient, while 80 to 90 percent of them have to buy feed from feed companies.”

Not only has the shift to meat boosted demand for domestic feed and turned China into the world’s biggest animal feedmaker, the country breeds and eats more pigs than anywhere else on the planet, according to the Ministry of Agriculture. Its largest farms are benefiting the most because they’re most able to afford investing in the facilities and ingredients needed to meet the government’s guidelines for safety, quality and environmental protection.

On the flip side, smaller companies have suffered. The number of China’s feed mills has fallen to 6,000 from 10,000 in 2010 as family-owned businesses were shuttered, Wang Junxun, a vice director at the agriculture ministry, said in December.

The surviving mills produced 200 million tons of animal feed in 2015, a 23 percent increase from 2010 and accounted for about one-fifth of global output, according to China’s agriculture ministry.

Nigeria Oil Output Drops Again as Leak Adds to Security Woes

May 11, 2016 — 1:39 PM BST Updated on May 11, 2016 — 4:57 PM B
At least a fifth of Nigerian oil production, equivalent to almost 400,000 barrels a day, has been shut down as a pipeline closure added to disruptions caused by militant attacks.

Royal Dutch Shell Plc declared force majeure -- a legal clause that allows it to stop shipments without breaching contracts -- on exports of Bonny Light crude following the discovery Tuesday of a leak on the Nembe Creek Trunk Line, according to a statement Wednesday. The incident comes amid escalating attacks by militants operating in the Niger River delta, which have already halted shipments from the Forcados terminal and the Okan oil platform.

“We don’t know if it’s an attack or sabotage” on the Nembe Creek line, Lagos-based Sola Omole, a spokesman for Aiteo Exploration and Production Co., the operator of the pipeline, said by phone. “It is only when the contractor gets to the site and takes a look at it that we can say definitively that this is the cause of the problem. ”

A resurgence of attacks on oil infrastructure caused Nigerian production to drop to the lowest in 20 years last month, compounding the impact of slumping crude prices on Africa’s largest economy. Formerly the continent’s largest oil producer, the nation has slipped into second place after Angola, according to data compiled by Bloomberg.

The Nembe Creek Trunk Line has a capacity of 600,000 barrels a day and runs for 100 kilometers (62 miles), gathering oil from a number of fields and delivering it to the Bonny crude oil terminal, according to Shell’s website.

At least 78,000 barrels a day of Aiteo’s crude output has been shut down because of the leak, Omole said. Production from Chevron Corp., Shell and Eroton Exploration and Production, another independent Nigerian company, would also have been affected, he said.

----Shell said the force majeure covers all Bonny Light shipments -- scheduled at 217,000 barrels a day next month -- without specifying how much production could be disrupted. Chevron declined to comment.

Ivory Coast cocoa mid-crop hurt by hot weather -farmers

Mon May 9, 2016 1:35pm GMT
ABIDJAN May 9 (Reuters) - Hot and dry weather last week in most of Ivory Coast's main cocoa regions hurt the trees needed to ensure abundant beans of good quality during the last stage of the mid-crop, farmers said on Monday.

The mid-crop in Ivory Coast, the world's top cocoa producer, runs from April to September and farmers said they need abundant rain until June to improve bean size and quality from July to September.

In the eastern region of Abengourou, known for the quality of its beans, farmers said the past two weeks were hot and dry.

"The rain has stopped. We are really worried," said cooperative manager N'Dri Kouao, who farms on the outskirts of Niable, near the border of Ghana. "If there are no rains this week the flowers will start to fall from the trees with this heat."

Similar growing conditions were reported in the southern region of Divo.

"We are asking ourselves what is going to happen to the little pods on the trees given the lack of moisture," said Amadou Diallo, who farms near Divo.

In the western region of Soubre, at the heart of the cocoa belt, an analyst reported 4 millimetres of rain in the past week, compared with 24 mm the previous week.

In the centre-western region of Daloa, which produces a quarter of national output, farmers reported patchy rain.

"There was burning sun every day. If it doesn't rain enough the light crop will be awful," said farmer Raphael Kouadio. (Reporting by Loucoumane Coulibaly; Editing by Matthew Mpoke Bigg and David Goodman)

Indonesia Coffee Crop May Tumble Most in 5 Years on Drought

May 10, 2016 — 12:44 AM BST Updated on May 10, 2016 — 9:07 AM BST
Coffee production in Indonesia will probably drop 10 percent this year after dry weather caused by the worst El Nino in almost two decades damaged some crops and delayed the harvest.

Farmers in the world’s third-largest grower of robusta may reap 570,000 metric tons of beans in the season that started April 1, down from a record 636,300 tons a year earlier, according to the median of five traders estimates compiled by Bloomberg. That would be the steepest decline since 2011-12, data from the U.S. Department of Agriculture showed.

A smaller Indonesian crop will cut supply of robusta beans used by Nestle SA, potentially boosting a rally in futures in London this year. The strongest El Nino since 1997-98 was largely responsible for dryness in the country’s main coffee-producing region of southern Sumatra last year, according to Indonesia’s Meteorology, Climatology and Geophysics Agency.

Drought killing next year's sugar crop

Exports down 20%, farmer debts pile up
1 Apr 2016
RATCHABURI -- Prasert Jitkham stoops down and pulls a yellowed sugar cane shoot from baked soil. The worst drought in more than 20 years `has killed the plant he should harvest next year.

The El Nino weather phenomenon has played havoc with crops across Southeast Asia and beyond. Thailand, the world's second-largest sugar exporter, will ship 20% less of the sweetener to international markets this year than last, and farmers fear the damage already inflicted on young cane plants could make next year worse.

A drop in exports from Thailand and India has contributed to forecasts for a widening global supply deficit this year, fuelling a rally in international prices to a 17-month peak last week and helping sugar outperform a commodity complex struggling with the slump in global oil prices.

"It's dead," Mr Prasert said, pulling the dusty shoot apart. "Worms have eaten up all its roots. They're all starting to die. This is the worst I've seen it since I started growing sugar cane in 1979."

International prices may have rallied but farmers are reaping no benefits. Mr Prasert and other sugar farmers in this central province say they have lost 20%-30% of their output this year due to the drought.

Dry conditions make cane less sweet, so mills need more to produce the same amount of sugar. That means they pay farmers less per tonne.

As the drought takes its toll on the young cane, farmers, sugar mills and the government have soured on their outlook for next year's crop.

"Farmers can't grow cane," said Boonthin Kotsiri, production director at the Office of Cane and Sugar Board. "There's no water."

Some farmers have turned to cultivating tapioca, he added, because it needs less water and generates similar income.

Sugar cane output is expected to fall below 95 million tonnes both this year and next, he said. That was down from 105.95 million tonnes in 2014-15.

China releases dam water to ease SE Asia drought

Much of the region, including Thailand and Laos, struggling to cope with the severe weather conditions.

17 April 2016
China has been releasing water from a number of its dams in an attempt to help relieve the drought in Southeast Asia.

Much of the region has been struggling to cope with the severe weather which is hotter and drier than usual because of strong El Nino.

Thailand is experiencing its worst drought in more than a decade with 14 out of 76 provinces badly affected.
The situation in Vietnam is not so good either with the country suffering its worst drought in 90 years.

Rice crop has been decimated across central and southern parts of Vietnam and around 1.8 million people are facing water shortage.

China has been partially responsible for the dire situation across the region.

However, release of the water is having little or no discernible impact as it dissipates into the massive delta region that is home to almost 20 million people.

At least 39 hydro-electric dams are currently under development in the region, most of them in southwest China.

In addition, Thailand, Cambodia and Laos have plans to build 11 new dams, potentially affecting 82 percent of the Mekong River's water.

Worst Drought in Decades Disrupts Life in Southeast Asia's Mekong Region

The El Nino weather pattern and hydroelectric dams are blamed for the crippling drought Southeast Asia has been going through.
May 2 2016, 9:18 pm ET
This ruined village had been underwater for 34 years since the Mae Chang reservoir was built in 1982, but the area has now re-emerged after water in the reservoir dried up.
Thailand is facing water shortage caused by the worst drought in decades due to El Niño phenomenon combined with seasonal hot weather, which have critically hit water storage as the water levels in the country's biggest dams are lower than 10 percent.
Vietnam's coffee and rice exports are very likely to be affected by its worst drought in decades, with salinization hitting farmers especially hard in the crucial southern Mekong delta.

Much-anticipated monsoon may not solve India's drought crisis

By Juliet Perry and Huizhong Wu, CNN Updated 0418 GMT (1218 HKT) May 9, 2016
India's killer heatwave is leaving the country reeling from the worst drought in decades and a rural population struggling to survive.

Relief is due with the arrival of the monsoon in mid-June, and because of the impending La Nina weather pattern, the forecast is for above-average rainfall.

However WaterAid India's Head of Policy, Nitya Jacob, says groundwater levels are so depleted that even if a good monsoon comes in June -- and meteorologists predict there will be one that ends the drought -- it won't be enough.

"Even if the monsoon is good, it cannot compensate," Jacob told CNN.

Central Water Commission data shows that India's major reservoirs are 79% empty, and 75% of India's basins are holding less water than the 10-year average.

CNN Meteorologist, Michael Guy, says this is usually the hottest time for the subcontinent, but this year has seen abnormally high temperatures.

"India is currently in their summer or pre-monsoon season, which lasts from April to late May, or early June," says Guy.

"This year we've seen temperatures range from the lower 40s to as high as 47˚C or 116˚Fahrenheit. For some, this is three to five degrees (Celsius) above normal."

And critically, the past two monsoon seasons have seen below average rainfall.
If commodities are bottoming, as El Nino drought plus all the central bankster electronic money printing is now shifting into an inflationary switch into commodities and tangible assets, the biggest bond bust in the history of modern mankind is just a heartbeat away. The central bankster Great Nixonian Error of fiat money will go out in a financial nuclear explosion of massive bond losses. Get long fully paid up physical gold and silver.
If all else fails, immortality can always be assured by spectacular error.

John Kenneth Galbraith.

Investors Fleeing $9 Trillion of Negative Yields Fuel Bond Binge

May 11, 2016 — 11:30 PM BST
There’s no shortage of demand in the $100 trillion market for global debt, as investors crowd into corporate and long-term sovereign obligations to steer clear of negative yields.
Yield-hungry bidders are snapping up government bonds. Auctions of long-term debt by the U.S., Spain and Portugal all drew strong demand Wednesday, with the Treasury sale seeing unprecedented appetite from one class of investors. Buyers are also clamoring for company bonds, in a week that may be the busiest this year for corporate borrowing in the U.S. and Europe.

The driving force behind the bond binge is the growing universe of negative-yielding securities, which has expanded above $9 trillion since the European Central Bank and Bank of Japan cut interest rates below zero. JPMorgan Chase & Co. predicts that with the supply of debt falling, conditions in the global bond market will be so favorable in 2016 that record-low yields are probably in store.

“In a yield-starved world, where a significant percentage of global government debt is yielding zero or something less, investors are reaching for yield by extending maturities, buying credit, or some combination thereof,” said Colin Lundgren, head of fixed income in Minneapolis at Columbia Threadneedle Investments, which managed about $470 billion as of Dec. 31.
On the one hand, the reach to pad returns shows that central banks’ efforts to push investors into riskier investments have been successful. But the phenomenon also means buyers are increasingly vulnerable to corporate defaults, or to rising interest rates. For the latter, that’s because debt with higher duration, such as obligations with longer maturities, suffers steeper losses when interest rates rise.
The broad global bond market’s effective duration reached an all-time high this month, according to Bank of America Merrill Lynch Indexes. That leaves investors at risk if views on the path of the Federal Reserve change. Traders are essentially counting out another Fed interest-rate increase for the time being -- futures don’t fully reflect the next hike until August 2017, according to data compiled by Bloomberg.

There can be few fields of human endeavour in which history counts for so little as in the world of finance. Past experience, to the extent that it is part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present.

John Kenneth Galbraith.
At the Comex silver depositories Wednesday final figures were: Registered 29.69 Moz, Eligible 123.33 Moz, Total 153.02 Moz. 

Crooks and Scoundrels Corner

The bent, the seriously bent, and the totally doubled over.
This morning, are the Olympic Games doomed?

Brazilian soccer star urges tourists to skip Rio Olympics

Published May 11, 2016
Brazil soccer great Rivaldo is telling tourists to stay away from the Olympics in Rio de Janeiro because of the danger of endemic violence.
Rivaldo posted the warning on his Instagram account and alluded to the case of a 17-year-old woman killed on Saturday in a shootout.
"Things are getting uglier here every day," Rivaldo wrote. "I advise everyone with plans to visit Brazil for the Olympics in Rio — to stay home. You'll be putting your life at risk here. This is without even speaking about the state of public hospitals and all the Brazilian political mess. Only God can change the situation in our Brazil."
The Olympics open in just under three months.
In a recent statement, Amnesty International said at least 11 people were killed in police shootings in Rio's impoverished favelas in April. It said at least 307 people were killed by police last year, accounting for 20 percent of the homicides in the city.
Violence is one in a long line of problems facing South America's first Olympics. Although venues are largely ready, the Zika virus, water pollution, and lukewarm tickets sales are worrying organizers. In addition, Brazil is in its deepest recession in decades and President Dilma Rousseff is fighting impeachment.

Brazil Senators Debate Into Night as Rousseff Faces Final Hours

May 11, 2016 — 5:09 PM BST Updated on May 12, 2016 — 5:24 AM BST
President Dilma Rousseff may be entering her final hours in office, as Brazil’s Senate gears up for a vote later in the morning that would force her to step aside and face an impeachment trial she’s unlikely to survive.

The Senate, which was expected to vote around 9 p.m. local time, debated late into the night and has already clocked up more than 16 hours of speeches and deliberations. Surveys by the local press show the opposition has 50 or 51 votes, more than the simple majority of the 81 seats necessary to put her on impeachment trial. Rousseff has already cleared her office of personal effects, including books and photos, newspapers reported.
Following more than five months of political turmoil that have exacerbated the worst economic recession in over a century and all but sidelined Rousseff’s economic agenda in Congress, her departure may make Brazil’s investment climate a bit more predictable, at least temporarily. The question is to what extent her replacement, Vice President Michel Temer, can live up to investor expectations of slashing a near-record budget deficit, said Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Center for Scholars.

Brexit The Animated Movie.

Brexit Quote of the week.

"When it becomes serious, you have to lie"

Jean-Claude Juncker. Failed Luxembourg Prime Minister and ex-president of the Euro Group of Finance Ministers. Confessed liar. EC President.

Solar  & Related Update.

With events happening fast in the development of solar power and graphene, I’ve added this new section. Updates as they get reported. Is converting sunlight to usable cheap AC or DC energy mankind’s future from the 21st century onwards? DC? A quantum computer next?

Off topic today but interesting. I wonder if changing magnetism has any effect on earthquakes?

How Earth's magnetic field is changing

Chris Wood May 10, 2016
The European Space Agency (ESA) launched its trio of Earth-facing satellites – the Swarm satellites – more than two years ago. Since then, the three probes have been tirelessly making measurements of the Earth's magnetic field, mapping it out in detail. Now, that data has been used in a new study of how the magnetic field has changed over recent years, with the results echoing what's happening at the planet's core.

Earth's magnetic field might be invisible, but it's complex and ever-changing, protecting us from cosmic radiation and solar winds. Since launching at the tail end of 2013, ESA's Swarm satellites have been studying the different magnetic signals from the planet's core, mantle, crust, oceans, all the way out to the ionosphere and magnetosphere.

All that data was recently used in a study to describe where the magnetic field is getting weaker, where it's strengthening, and perhaps most importantly – how fast those changes are occurring. The findings are presented at the Living Planet Symposium, which is being held this week, and include two animations showing the changes.

The first animation, which also makes use of data from CHAMP and Ørsted satellites, shows changes in field strength between 1999 and May 2016. The red regions are where it got stronger, while the blue regions show a weakening.

Overall, the magnetic field has weakened by some 3.5 percent over North America, but has become around 2 percent stronger over Asia. The absolute weakest area of the field, known as the South Atlantic Anomaly, also weakened by some 2 percent as it moved steadily to the west.

The second animation is a little different, describing the rate of change between 2000 and 2015. Similar to the first animation, slowing regions are seen in blue, while those speeding up are visible in red. It's a complex picture, with changes increasing in speed over Asia, while they slow down around South Africa.

The monthly Coppock Indicators finished April

DJIA: 17773.64-19 Down. NASDAQ:  4775.36 +11 Down. SP500: 2065.30 -21 Down.

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