Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Most Exciting Biotech Stock Of The Year? - 17th May 21
Gold Mining Stocks Fundamentals - 17th May 21
Junior Gold Miners Should be Rallying – What’s Holding Them Back? - 17th May 21
Stock Market - Should You Be In Cash Right Now? - 17th May 21
Learning the Financial Markets - 17th May 21
INVESTING IN HIGH RISK TECH STOCKS - ALL OR NOTHING - 16th May 21
Is Stock Market Selling Madness About Over? - 16th May 21
Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
Budgies Birds of Paradise Indoor Grape Vine Singing, Chirping and Flying Parakeets Fun 3D VR180 UK - 16th May 21
Wall Street Roiled by Hot Inflation Data: Is This REALLY “Transitory”? - 16th May 21
Inflation Going Stag - 16th May 21
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

“CORN BASED” Ethanol, part II the dominoes begin to fall!

Commodities / Ethanol May 11, 2007 - 12:47 PM GMT

By: Ty_Andros

Commodities

Eight to 12 weeks ago I penned a piece on CORN BASED ethanol in the “Fingers of Instability” series, it is a careful overview of the industry and its potential benefits (NONE) and pitfalls (you can access it at TedBits March 14, 2007 I strongly recommend you read it before beginning this commentary, it is time well spent), now in part two we take a look at the burgeoning problems we outlined in that piece. It is a disaster, written larger and larger like a boulder hitting water the waves emanating outward are killer waves to so much more. It is like a game of dominoes where once set in motion it is difficult to race ahead of the chain reactions to avoid further downfalls.

El Ninja, has emerged off the coast of South America . What does this mean? It means a wet spring and hot summer if history is correct. The wet spring has become a reality , we will see about the hot summer part of the forcast. Having grown up in the corn belt of Lincoln , Nebraska I understand corn fairly well. I still remember some of my earliest summer employment De tasseling corn. It was grueling work in the hottest part of the summer, but as a young boy I was very strong and it was always wonderful to finish the work and emerge with a POCKETFUL of cash. It was great money for me at the time.


But farmers will tell you that if the crop is not substantially in the ground by the end of the first week in May 8-12 th , it is probably time to switch your planting intentions to Soy beans or other more hardy crops that can meet the expected weather. The odds of avoiding a freeze, or having good weather during the pollination process when the crop gets MADE start working against you. Make no mistake Farmers are gamblers in that all crops are a gamble till they are taken out of the field during harvest. Drought, hail, windstorms, floods: all are challenges farmers face every year. This winter's wheat crop was set to be record large till early April when a late freeze hit the crop, decimating the expected harvest by 30 to 40%. Mother Nature threw the dice and the American wheat farmer was hit hard!

With the rapid expansion of ethanol production rapidly depleting inventories corn prices have soared to over $4.00 a bushel, old crop and NEW CROP ( new crop prices are always been much much lower than old crop as long as I can remember. It stands to reason that once the crop arrives, supplies become plentiful once again so prices drop). I have watched corn prices almost every year drop to approximately $2.00 or slightly lower. These prices have created intentions to increase corn production by over 15% to over 90 million acres, to meet the requirements of the food industry and energy producers. Soo far so good.

Too many fund investors where on board the anticipated move higher in corn and a washout occurred, taking them off the train, probably only temporarily.

But Murphy's Law is raising its ugly head “What can go wrong will go wrong” and the laws of unintended consequences (unintended don't mean unanticipated these are easily recognized opportunities) is about to explode in our faces. Corn planting has been delayed by cold and very wet weather. They haven't been able to get into the fields as they have been full of mud. Ever tried to get a Tractor or planting machine out of the mud? It is HELLL! So, planting of the intended corn crop is not in the ground is over 50% behind schedule at this late date.

Because of crop insurance that set at high prices many farmers will plant the corn regardless of when it gets into the ground, they are guaranteed their price by the government. But other farmers didn't put their acres into the program. So their planting intentions are already rotating to other grains, they will continue to do so for the next three weeks. From here on in any corn planted has diminished expectations. In three weeks don't even consider it. It is a disaster even today, set to grow to gargantuan proportions over the coming weeks and months. There is no way they can reach the intended acreage from here! Corn this week has been plummeting in price in anticipation of planting getting back on schedule, well as we go to press, huge rain storms have hit Iowa , Missouri and Kansas , 4 to 8 inches of rain and flash floods are being reported. Whoop's El ninja strikes again. Subsoil moisture is outstanding so the crop should start well unless flooding takes place.

Even if they get it in the ground, the anticipated heat will kill the yield, if el ninja produces its usual summer intense heat. Corn is a crop that needs regular rain, weather patterns provide regular anxiety year in and year out as farmers scour the weather map for this vital ingredient. Intense heat over 80 degrees for extended period is also very counter productive, the corn crop need regular temperature drops onto the high 50 to low 60's at night for optimal development. During El ninja you can expect neither, brutal heat day and night combined with far less rain.

But there is now a new problem to add to the equation. Ethanol production is mandated to increase, it is written into the law. The plants are open and new ones are being completed on a weekly basis. Current ethanol demand has completely depleted current inventories and reserves. The USDA barely talks of this ethanol demand, it is potentially explosive news, panic could easily enter the marketplace. It is the one problem that the liars at the USDA can't manage with their usual rhetoric. I have read Bill Gary's excellent work since the mid 1990's, he always publishes his estimates and the official USDA numbers. The USDA regularly rigs the game by releasing numbers that send the grain markets to the lowest price possible, just as the commerce department shades the GDP numbers, the labor department shades the unemployment data, and the treasury manipulates the inflation numbers. It is a predictable pattern used to manipulate the public and manage expectations, they are masters of this game. Some of their lies are unknowable, and we will never discover them, they are buried in the numbers they massage.

(Authors note; looking for assistance in creating portfolio diversification that can survive and thrive in what I am outlining? In fingers of instability? If so contact me through www.TraderView.com . Subscriptions to this newsletter are also free at this address; send it to a friend, Thank you)

Well the numbers are really becoming quite clear as it relates to corn. THEY ARE VERY UGLY. There is no room for a poor crop, but we are already at a poor crop because of the late planting. People and livestock require food. The crop is not going to be the size that was intended or required to meet all these demands of the competing groups of consumers: people, livestock and ethanol. Corn stocks in China , Mexico , the former Soviet Union , the EU and India are low as well. Food protests are emerging in many of these places. World corn consumption has exceeded production for 7 out of the last 8 years.

Well, domestic and international wheat stocks are also very low. Droughts throughout the world last year severely reduced wheat stocks and prompting export restrictions in many exporting countries, Australia , a major exporting nation suffered an almost complete wheat crop failure, production plunged from 25 million bushels to about 10 million. So major consuming regions went to higher priced producers to supplement their food and feed requirements. Reducing inventories around the world even more. Six out of the last seven years the world has consumed more wheat than it produced. Ending world stocks of wheat this year will be the lowest in 26 years.

As mentioned above the US wheat crop has been severely reduced by the late freeze. Can you guess who is having problems for the 2 nd straight year? Yep, you got it Australia is again in trouble. So switching to wheat as feed grain is problematic at best, additionally wheat doesn't really fatten livestock like corn does. So you need to feed more of it to get the same weight. Chickens can eat a lot of soy meal, but cows and pigs can't. It causes the runs, especially in the piggy's.

As incomes rise around the world demand for grains and meats will drive usage incrementally higher as they use rising incomes to feed themselves better. Incomes are rising around the world as 3 billion people enter the global economy after years in poverty. They wish to feed themselves in a better manner, and are doing so daily.

We are in the beginning stages of a massive bull market in grains. Historic, shortages in beans and wheat which should emerge with next years crop, and are close on the heels of the present and emerging corn shortage. The full impact of bio-fuels has still not been felt, as worldwide new plants come on line over the next year, they will be. See how soy and palm oil are beginning to move? Add to this situation the tremendous liquidity now searching for alpha in the hedge and commodity investment funds “fire hoses of hot money” and this really is shaping up to be quite a fireworks show. At one point earlier this year the corn crops open interest at the Chicago board of trade was double what could be harvested. WOW. The dominoes of disaster roll forward as CORN BASED ethanol's unintended consequences (unintended does not mean unanticipated, these are big investment opportunities). This is an asset class that has “Finger of Instability” (see Tedbits archives for the series at www.TraderView.com ), written all over it. It can and will get way ahead of itself before the bubble pops.

The definition of inflation is when you purchase something today because you know it will be higher in price tomorrow. We are going to see this written in real life as the consumers and industrial users of this essential commodity we call corn duke it out, with the speculators in there to make their lives even more miserable through higher prices. The stupid, politically inspired American experiment in “CORN BASED” ethanol is about to roll over you like a steamroller!!! What a wonderful addition to add to our lives! NOT. Do you know what to do? Do you know who to thank for this wonderful opportunity?

Thank you for reading Tedbits...

Subscribe to Tedbits - Click Here Tell a Friend About TedBits - Click Here

By Ty Andros

Tedbits is authored by Theodore "Ty" Andros , and is registered with TraderView, a registered CTA (Commodity Trading Advisor) and Global Asset Advisors (Introducing Broker). TraderView is a managed futures and alternative investment boutique. Mr. Andros began his commodity career in the early 1980's and became a managed futures specialist beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio selection and monitoring, customer relations and all aspects required in building a successful managed futures and alternative investment brokerage service. Mr. Andros attended the University of San Di ego , and the University of Miami , majoring in Marketing, Economics and Business Administration. He began his career as a broker in 1983, and has worked his way to the creation of TraderView. Mr. Andros is active in Economic analysis and brings this information and analysis to his clients on a regular basis, creating investment portfolios designed to capture these unfolding opportunities as the emerge. Ty prides himself on his personal preparation for the markets as they unfold and his ability to take this information and build professionally managed portfolios. Developing a loyal clientele.

Disclaimer - This report may include information obtained from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made to ensure its accuracy or completeness.  Opinions expressed are subject to change without notice.  This report is not a request to engage in any transaction involving the purchase or sale of futures contracts or options on futures.  There is a substantial risk of loss associated with trading futures, foreign exchange, and options on futures. This letter is not intended as investment advice, and its use in any respect is entirely the responsibility of the user. Past performance is never a guarantee of future results.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in