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Thread: food and energy futures starting to launch, but not precious metals

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    Default food and energy futures starting to launch, but not precious metals

    If you will recall, several months ago there was concern that a lack of 'credit' being made available to farmers was going to result in smaller harvests. This was the likely direct result of some farmers being unable to borrow sufficient funds (at an affordable interest rates) to fully plant this year's crops or to fund the use of fertilizers and pesticides at levels that will yield maximum crop production. Well, it appears that such concerns are turning out to be true. Southern hemisphere harvests are coming in well below expectations. As a result, global net buyers are scrambling to lay their hands on (what remains of) America's stored surplus of crops from last year's harvest.



    (snip)"China chews through U.S. 'old-crop' soybeans
    The U.S. 'old-crop' soybean plot could continue to thicken this summer, raising prices.

    By Mike McGinnis
    Agriculture Online Chicago Markets Bureau Chief
    5/20/2009, 1:51 PM CDT

    CHICAGO, Illinois (Agriculture Online)--The U.S. supply of 'old-crop' soybeans is projected to be the smallest ever this summer.

    That is creating a run-up in CBOT soybean futures prices. The July CBOT soybean prices, at $11.85 per bushel, jumped 76 cents from Sunday night to Wednesday

    The price surge is also sparking world buyers to secure supplies ahead of any demand-rationing.

    A few well-respected U.S. trading firms this week estimated very tight old-crop soybean ending stock estimates. These estimates represent the 2009 soybean crop-year that ends August 31.

    Most trade estimates for the U.S. old-crop soybean carryout on August 31, 2009, range between 60 and 80.0 million bushels, vs. the USDA's estimate of 130 million.

    "An extraordinarily tight number by historical (or any) standards," says Vic Lespinasse, CBOT market analyst and floor trader with GrainAnalyst.com.

    The U.S. domestic soybean meal crush runs about 120 million bushels per month between August and November. By November, crush is ramped up to 150 million bushels. "So, we're going to either run out or ration the crusher," the unnamed floor trader says.

    HOW IT HAPPENED

    The idea of tightening U.S. old crop soybean stocks has been around awhile. But, it's been a quick turnaround in perception, CBOT floor traders say.

    The road to very tight supplies started with the Chinese government announcing it is procuring 7.0 million metric tons of soybeans for its state reserve.

    On Wednesday, news reports indicated the Xinhua, the official Chinese news agency, says unnamed Chinese experts want the government to use some of its massive foreign currency reserves to build up a Chinese bean stockpile of 50 million metric tons. [I have been suspecting this for some time. China is buying up all domestic soybean productions, forcing their domestic crushers to import US soybeans. This reduces China’s trade deficit and accumulation of dollar reserves.]

    Lespinasse says this is unimaginable and will not happen. "But it makes one wonder why Xinhua would even print such a story." [because it is obviously true. Or perhaps China’s soybean crop has been hurt worse by drought then they are willing to admit.]

    China announced its stockpiling initiatives at a time when Argentina's 2009 soybean production, hurt by drought, was much worse than people thought."(snip)

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    Default Re: food and energy futures starting to launch, but not precious metals

    Oil futures are also up, for several reasons ...



    (snip)"May 22 (Bloomberg) -- Crude oil rose in New York and was poised for an 9.5 percent gain this week as the dollar fell to a four-month low against the euro, drawing investors to crude as an inflation hedge.

    Oil also gained as fighting between militants and the army in Nigeria’s Niger River delta region escalated, reducing the West-African country’s fuel output.

    “Today it’s the U.S. dollar movement and risk appetite at play,” said Eliane Tanner, an analyst at Credit Suisse Group AG in Zurich. “The market has got ahead of fundamentals, but as long as sentiment and risk appetite remain positive, prices might go higher.”

    Crude oil for July delivery rose as much as 77 cents, or 1.3 percent, to $61.82 a barrel in electronic trading on the New York Mercantile Exchange. It was at $61.73 a barrel at 1:01 p.m. in London.

    Demand for commodities as an alternative investment increases as the dollar drops because oil and gold traditionally hold their value against the falling currency. The dollar fell to $1.3953 per euro as of 12:29 p.m. in London after reaching $1.3981, the lowest since Jan. 5. Crude prices were 80 percent correlated with the decline in the dollar against the euro since the beginning of the year, according to Bloomberg data. "(snip)



    (snip)"The Arabs have been planning for over two years an asset-backed new currency for the Gulf region. New crude oil purchases would ostensibly be conducted in the new dinar denomination, bringing an end to the Petro-Dollar standard. In early May, the decision was made to locate their new central bank in Riyadh. NOW THE EXIT FROM THE MONETARY UNION BY THE UNITED ARAB EMIRATES SIGNALS SOMETHING BIGGER. MY BELIEF IS THAT THE U.A.E. REJECTED THE SAUDIS DUE TO TIGHT US GOVT BEDFELLOW RELATIONS. THE U.A.E. WILL NEXT COURT A GRANDIOSE ACCORD WITH RUSSIA. THE NEW ALLIANCE WILL INCORPORATE A NEW CURRENCY, NEW PLEDGES OF SECURITY PROTECTION, AND A COORDINATION OF CREDITOR ACTIONS. The Creditor Nations will soon tighten the noose around the necks of Debtor Nations, and force a global banking shift of power. It will be astonishing in its effect."(snip)


    there is also an 'unspoken' issue of the nationalization of oil production facilities in Argentina, plus new 'development deals' being made between China and various oil producing countries, effectively taking X million barrels worth of oil production OFF the world market and dedicating that oil to China ! This de-facto reduction in 'free market' oil supplies drives prices higher for 'free market' buyers.

    ~
    Last edited by Melonie; 05-24-2009 at 05:59 AM.

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    Default Re: food and energy futures starting to launch, but not precious metals

    but Gold has been a very different story ...





    (snip)"So then, who sold 65 tons (2.3 million ounces) of gold on the COMEX in the last two days? Where did this 65 tons come from? Why sell it now, as gold soars and the dollar crashes?

    The only logical answer is that this is a blatantly obvious attempt to keep gold prices in check. The 65 tons of gold was conjured out of thin air.


    Conclusion: There are two key points to take away from this.

    1) Despite the best efforts of gold shorts, physical demand is driving prices higher. The 65 tons of paper gold sold on the COMEX was to absorb as much investor demand as possible, keeping it out of the physical market where it would send prices upwards.

    2) Such obvious attempts to suppress gold prices are a sign of desperation. Each new piece of evidence of manipulation pushes new investors into the physical gold markets, which can’t be controlled. So while shorts on the COMEX managed to absorb 2 billion dollars of gold demand, they also provided near indisputable proof that the COMEX gold market is rigged, damaging faith in the US financial system. "(snip)

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