Spot Commodity Prices: CRB Spot Index (1947 – Present);
16-Raw Industrial Spot Price (1935-1947);
Great Britain Wholesale Price of All Commodities (1885-1935) and Z Scores from Primary Trend

Headline: Japan Rice Buying May Outstrip Supply on Hoarding, Marubeni’s Shibata Says

Japanese consumers may almost double rice purchases this fiscal year, driven in part by contamination “rumors” surrounding the nation’s worst earthquake and nuclear disaster, as demand outstrips crimped domestic production.

Hoarding may result in purchases of as much as 15 million metric tons, from about 8 million tons last year, making it impossible for Japan’s farmers to meet demand after a quake- generated tsunami washed over paddies in an area representing 18 percent of the country’s output, said Akio Shibata, head of the research unit at Marubeni Corp., in an interview in Tokyo.

Source: bloomberg.com

However, Pimco and Gross are notoriously flaky in their public statements and behavior. In the wake of the financial crisis, it was Pimco who clamored for increased government spending and for a bailout for Freddie and Fannie. Pimco invested heavily in those higher yielding bonds on the basis that the government would bail out bondholders. Only a few years later, we have Gross at the other end of the spectrum, noting the obvious about our deficits and national debt.

So we should all take Gross’ comments at face value and dump our bonds?

The picture shows TLT and the CCI (Commodities). Interesting how Bonds have put in another bottom and have continued their pattern of higher lows. We also note the negative correlation between Bonds and Commodities. Its not a perfect correlation but its an important indicator. The fact that Bonds have put in another bottom and Commodities are well above their long-term moving averages, is reason why we are near-term cautious on Commodities.

The bottom line is one has to study the charts, sentiment indicators and macroeconomic factors rather than listen to so-called experts like Bill Gross, Warren Buffet or any Federal Reserve member. For all we know, Gross could have sold his holdings six months ago and went long days after his public statement.

The inflation trade is raging but Bonds have put in a low. The US Dollar is reaching an oversold extreme in terms of price action and sentiment. This could be the beginnings of a pause or correction in the Commodities bull market. For more analysis and insights, consider a free 14-day trial to our premium service.

Jordan Roy-Byrne, CMT
Trendsman@Trendsman.com
Subscription Service

How is the bowl of Wheaties you ate this morning linked to a barrel of oil? In this exclusive interview with The Energy Report, Bob Moriarty, founder of 321energy.com, explains why the cost of producing food is directly correlated to fuel and picks which companies are poised to benefit from the rising value of potash.

The Energy Report: You wrote that “the uprising in Egypt began as a protest against the rapidly rising cost of food and energy.” You went on to say that “it seems obvious that food and fuel are the same thing under a different cloak. Energy is food is population.” Can you elaborate?

Bob Moriarty: Anyone who wants to verify this should search Google for a chart of population growth compared to oil production. The two are identical from about 1850 on. Here’s why: it takes so many calories of fuel to produce so many calories of food. It’s direct, linear and absolute. If the price of fuel doubles tomorrow, how much more or less driving would you do?

TER: Less, but I would still have to drive. I could not eliminate it.

BM: Would you eat more food or less food?

TER: I could eat less given the price.

BM: Everyone else in the world feels the same way. The majority of people in the world survive on $2 worth of food each day. But how do you eat less when you are on the edge of starvation in the beginning? There has been a 70% increase in the price of wheat since June. That’s catastrophic.

I believe that peak oil, or the peak of oil production, occurred back in 2005 or 2006. Peak oil means peak food, which means peak population. We’re going to consume less fuel per capita 20 years from now because there’s simply no alternative. In turn, that means the population is going to decrease. It could decrease through starvation, disease, war or all three.

TER: In the same article, you said there are other ways that people might be able to produce more food with the same amount of fuel. Besides decreases in population, another outcome could be that less oil would drive more innovation in food production.

BM: That’s the real point of the article—there are things that people can do. Potash is used to make fertilizer. As food gets more valuable, potash gets more valuable. It’s not necessarily that you’re more efficient in the production of food. If the price of wheat doubles, farmers can afford twice as much potash. It’s not necessarily more efficient; it’s just cheaper in relative terms.

TER: Besides wheat, other food commodities have recently increased dramatically in price. Potash has already risen quite a bit in cost. Looking forward, is there still a lot of upside for potash as a fertilizer component?

BM: Absolutely, because the price of food is going to go higher and higher. Potash is around $600/ton now, but it could be $1,500/ton based on the cost of food today.

TER: If the price of potash increases, do you anticipate that more juniors and explorers will be exploring for potash?

BM: That’s the way supply and demand is supposed to work. When uranium went from $8/lb. to $136/lb., there were 450 companies out there exploring for it. Now that doesn’t mean they’ll be successful.

TER: You were a very early investor in Passport Potash Inc. (TSX.V:PPI, OTCQX:PPRTF). But, ironically, you sold your Amazon Mining (TSX.V:AMZ) shares after the company abandoned gold-mining plans for potash.

BM: Amazon had a gold project in the Amazon. I was hoping the company would get into production. Shares at the time were around $0.09. The company made the decision to go into potash. Potash was not particularly popular then, and I thought they were making a mistake. I wanted to see them advance the gold project and get it into production. So, I sold all my shares. Well, everybody in the universe discovered potash at the same time. Amazon Potash is an $8 stock now. I should’ve hung on to the stock. That was a very expensive mistake on my part.

TER: What about Passport changed your mind about potash?

BM: Someone presented the Passport story to me about two-and-a-half years ago. It had a big land position in Holbrook Basin, Arizona. I bought into it. Potash was about $900/ton back then. The stock went up to around $0.22.

The company came to a point at which it had squandered all its money. Fortunately, the company found a deep-pockets investor. The investor thought that it sounded like a pretty easy deal, and asked what the company needed to succeed. They said, “We need a check for $750,000 right now so we can go drill.” They did drill and it was successful. The investor was buying shares at a nickel each. The stock was around $1 two weeks ago. He made a ton of money in it.

For Rest of Interview Go Here

Frailty of monetary policy under delusional Keynesians is evident whenever we think about Agri-Food. Price increases for Agri-Foods may be causing measures of consumer prices to rise in many countries. That “inflation,” which it is not, is causing some discomfort for politicians around the world. The textbook response, per the ineffective and inbred Keynesian economists, is to tighten monetary policy, perhaps raising interest rates. We ask one simple question: How does raising interest rates cause the supply of Agri-Food to rise, forcing prices lower? Will higher interest rates keep the price of shoes from rising?

“Prices for cattle hides are on the rise as leather demand rebounds and global supplies fall, boosting the returns of meat packers and cattle producers.”

“Federal[U.S.] data show hide prices are at their highest level in nearly a decade, jumping 24% in the last year to $82 apiece. Further gains are likely this year as U.S. supplies begin to shrink and consumer demand for leather continues to recover, . .”

“Helping to fuel the jump in prices has been a growing middle class in China, Vietnam and other Asian countries where consumers are increasingly buying leather goods as incomes rise. As economies around the world recover from deep recessions, consumers are again shelling out for luxury leather goods.”

“U.S. Commerce Department put the value of cattle hide exports in 2010 at $1.373 billion, up 67.7% from a year earlier when low prices allowed the number of actual hides exported to hit a record 35.6 million pieces.(Commodity News for Tomorrow, 4 March 2011)”

If clothing retailers think cotton prices are a drag, wait till they see what happens in the shoe department. Price of hides and shoes cannot rise sufficiently to induce cattle breeders to expand herds. Such is the Joy of Agri-Food Price Inelasticity. No matter how high the price of shoes might rise, ranchers will not raise more cattle to satisfy demand for leather.

How will QE-2, QE-3,or QE-4, in a chain of futile an

d doomed policies, or raising interest rates hold down price of chickens? In the above graph is portrayed the price of broilers, table chicken, in the U.S. As is readily evident, even to a Keynesian economist, chicken prices have broke out to upside.

Prices for chicken had long been flat, held down by the brutal, price suppressing  power of a group of oligopolistic chicken purchasing companies. All that worked, till grain prices rose dramatically. Profits of chicken raisers disappeared faster than the grain fed to the chickens. Producers had no choice but to unload those chickens into the market. Prices collapsed under that selling. First round effect of higher grain prices is lower meat prices as producers sell animals to avoid feeding them.

Now, it appears, the second round effect has developed. With smaller flocks the buyers have lost some power, and prices have risen dramatically. Could $1.25 per pound chicken arrive in the near future? Quite possibly, and one better enjoy that cheap chicken sandwich at your favorite restaurant while one can.

Investors that missed the latest, but surely not the last, round of excitement in Agri-Equities may get another opportunity this Summer. Agri-Food prices, on average, have dipped to their lowest level in five weeks. That correction is likely to continue well into the North American growing season.

Traders and buyers had simply become too bearish on supply, bullish on prices, in the short-term.  Buying of wheat and corn may have been panic driven, and in excess of true needs. Latest USDA WASDE, World Agriculture Supply Demand Estimate, simply did not have enough bear food in it for the supply bears. Next important report is the U.S. planting intentions report due 31 March. It will probably also fail to nourish the supply bears. Add a little of Japan’s misery, and we have likelihood of a continuing correction in Agri-Food prices.

Tier One Agri-Equities, large multinational Agri-Food companies, have risen in conjunction with the rally in Agri-Food prices. Likely that they will correct along with Agri-Food prices, as they did after the 2008 run. Tier Two Agri-Equities, Chinese Agri-Equities, then performed the best. As they are over sold relative to Tier One Agri-Equities, investors should be preparing to add to Chinese Agri-Equities in the near future.

“Nuclear Nightmare: A radioactive death cloud from one or more of the Japanese reactors experience core meltdown and catastrophic release of radiation could …”
Japan Does Not Face Another Chernobyl

The containment structures appear to be working, and the latest reactor designs aren’t vulnerable to the coolant problem at issue here.
William Tucker
www.terrestrialenergy.org
Even while thousands of people are reported dead or missing, whole neighborhoods lie in ruins, and gas and oil fires rage out of control, press coverage of the Japanese earthquake has quickly settled on the troubles at two nuclear reactors as the center of the catastrophe.

Rep. Ed Markey (D., Mass.), a longtime opponent of nuclear power, has warned of “another Chernobyl” and predicted “the same thing could happen here.” In response, he has called for an immediate suspension of licensing procedures for the Westinghouse AP1000, a “Generation III” reactor that has been laboring through design review at the Nuclear Regulatory Commission for seven years.

Before we respond with such panic, though, it would be useful to review exactly what is happening in Japan and what we have to fear from it.

The core of a nuclear reactor operates at about 550 degrees Fahrenheit, well below the temperature of a coal furnace and only slightly hotter than a kitchen oven. If anything unusual occurs, the control rods immediately drop, shutting off the nuclear reaction. You can’t have a “runaway reactor,” nor can a reactor explode like a nuclear bomb. A commercial reactor is to a bomb what Vaseline is to napalm. Although both are made from petroleum jelly, only one of them has potentially explosive material.

Once the reactor has shut down, there remains “decay heat” from traces of other radioactive isotopes. This can take more than a week to cool down, and the rods must be continually bathed in cooling waters to keep them from overheating.

On all Generation II reactors—the ones currently in operation—the cooling water is circulated by electric pumps. The new Generation III reactors such as the AP1000 have a simplified “passive” cooling system where the water circulates by natural convection with no pumping required.

If the pumps are knocked out in a Generation II reactor—as they were at Fukushima Daiichi by the tsunami—the water in the cooling system can overheat and evaporate. The resulting steam increases internal pressure that must be vented. There was a small release of radioactive steam at Three Mile Island in 1979, and there have also been a few releases at Fukushima Daiichi. These produce radiation at about the level of one dental X-ray in the immediate vicinity and quickly dissipate.

If the coolant continues to evaporate, the water level can fall below the level of the fuel rods, exposing them. This will cause a meltdown, meaning the fuel rods melt to the bottom of the steel pressure vessel.

Early speculation was that in a case like this the fuel might continue melting right through the steel and perhaps even through the concrete containment structure—the so-called China syndrome, where the fuel would melt all the way to China. But Three Mile Island proved this doesn’t happen. The melted fuel rods simply aren’t hot enough to melt steel or concrete.

The decay heat must still be absorbed, however, and as a last-ditch effort the emergency core cooling system can be activated to flood the entire containment structure with water. This will do considerable damage to the reactor but will prevent any further steam releases. The Japanese have now reportedly done this using seawater in at least two of the troubled reactors. These reactors will never be restarted.

None of this amounts to “another Chernobyl.” The Chernobyl reactor had two crucial design flaws. First, it used graphite (carbon) instead of water to “moderate” the neutrons, which makes possible the nuclear reaction. The graphite caught fire in April 1986 and burned for four days. Water does not catch fire.

Second, Chernobyl had no containment structure. When the graphite caught fire, it spouted a plume of radioactive smoke that spread across the globe. A containment structure would have both smothered the fire and contained the radioactivity.

If a meltdown does occur in Japan, it will be a disaster for the Tokyo Electric Power Company but not for the general public. Whatever steam releases occur will have a negligible impact. Researchers have spent 30 years trying to find health effects from the steam releases at Three Mile Island and have come up with nothing. With all the death, devastation and disease now threatening tens of thousands in Japan, it is trivializing and almost obscene to spend so much time worrying about damage to a nuclear reactor.

What the Japanese earthquake has proved is that even the oldest containment structures can withstand the impact of one of the largest earthquakes in recorded history. The problem has been with the electrical pumps required to operate the cooling system. It would be tragic if the result of the Japanese accident were to prevent development of Generation III reactors, which eliminate this design flaw.

Mr. Tucker is author of “Terrestrial Energy: How Nuclear Power Will Lead the Green Revolution and End America’s Energy Odyssey” (Bartleby Press, 2010).
====

Japan nuclear crisis: Fukushima ‘meltdown’ is worrying, but this is no Chernobyl

By Tom Chivers

http://blogs.telegraph.co.uk/news/author/tomchiversscience/

“So by all means build future nuclear power stations in Japan to withstand greater earthquakes. But don’t think this means that nuclear power is unsafe. And, most importantly, don’t let the very human fear of the words “radiation”, “nuclear”, “meltdown” and “Chernobyl” distract us from the real tragedy, which is an unfolding humanitarian disaster of entirely natural and familiar causes. The real problem over the next few days is not going to be radiation sickness. It’s going to be hypothermia. Fukushima is a high-profile diversion. Snow is the silent killer.”
***
Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com

If you’re interested in learning more about junior bio-techs and the junior resource market please come and visit us at www.aheadoftheherd.com.

Membership is free, no credit card or personal information is asked for.

***

Richard is host of www.aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Lewrockwell.com, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, Mineweb, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.

***

Legal Notice / Disclaimer

This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Richard Mills has based this document on information obtained from sources he believes to be reliable but which has not been independently verified.

Richard Mills makes no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Richard Mills only and are subject to change without notice. Richard Mills assumes no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission.

Furthermore, I, Richard Mills, assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information provided within this Report.

Source: http://www.dailywealth.com/1666/On-the-Ground-in-Japan

By Eric Fry

03/15/11 Laguna Beach, California – Chris Mayer, editor of Mayer’s Special Situations, shared this bit of investment wisdom with his subscribers yesterday:

“Charlie Munger, the long-time Vice Chairman of Berkshire Hathaway, says there are three buckets where investment ideas go: ‘Yes,’ ‘No’ and ‘Too Hard.’ I think uranium is too hard.”

We would not quarrel with that logic; and we certainly would not quarrel with Chris’s caution. As an early, and indefatigable, bull on uranium, Chris led his subscribers to some very large gains in the sector. After yesterday’s selloff, some of those gains were much smaller than they had been. Nevertheless, Chris told his subscribers to “hit the bid” on two of the uranium plays he had recommended.

“I think we should sell our two uranium holdings,” Chris wrote. “We’ll book a 73% gain on Kalahari Minerals (KAH:lsx) and a 10% gain on Paladin Energy (PDN:tsx; PALAF:pink sheets). The latter is down 23% today. Once, we were up 70% on the name. So this is a disappointment. But Kalahari is a very nice win for a stock we held little more than a year.”

Uranium is “too hard” indeed. On the other hand, nothing is very easy these days. Following the Nikkei’s vertical plunge during the last two days, most stock markets around the globe also posted minus signs. From the highs of March 11 – the day the 9.0 quake struck – to the lows of today, Japan’s Nikkei Index plunged more than 20%. The would-be buyers of Japanese stocks apparently decided that widespread devastation and smoldering nuclear power plants are not bullish phenomena.

Following the Nikkei’s example, the MSCI EAFE Index of international stocks dropped 7% during the last three trading sessions and erased its gains for the year-to-date. Here in the States, stocks are also wobbling. But buying interest seems to await every selloff. On Monday morning, the Dow Jones Industrial Average sliced through 12,000 immediately after the opening bell and fell as much as 140 points. But as the lunchtime hour was drawing to a close – about the time the third martinis were making their way to the lunch tables – investors regained their bravado.

No tsunami carnage or atomic plumes were going to get in the way of their “Buy” orders! Nosirree! And no Middle East civil wars were either. After all, Warren Buffet bought Lubrizol. That had to count for something, right?

By day’s end, the Dow had trimmed its losses to a mere 51 points, while nearly reclaiming the 12,000 mark. In this morning’s trading session, the Dow is attempting an encore. After tumbling nearly 300 points at the opening bell, the Dow has shaved its losses to only 150 points (as of this moment). Even so, the NASDAQ Composite Index has slipped into the loss column for the year-to-date, while the Dow and S&P 500 are flirting with a similar fate.

Tomorrow is another day, of course. But tomorrow’s news stories probably won’t look dramatically different from today’s. One possible exception may be the news stories circulating about the nuclear power industry.

According to today’s headlines, the post-quake crisis at several Japanese reactors is a “Three Mile Island event” that will stop the growth of nuclear power dead in its tracks. A gaggle of government officials around the world are saying as much…and we take them at their word, sort of.

Obviously, the unfolding nuclear tragedy in Japan is not a non-event…as the harrowing volatility in global stock markets attests. The uranium sector, in particular, is in full meltdown mode: The ISE-CCM Global Uranium Stock Index has plummeted 27% during the last week. The price of uranium itself (“U308”) is down a similar amount. Not a good week for the uranium bulls.

But just maybe, tomorrow’s headlines about the fate of nuclear power will not resemble today’s. Just maybe, tomorrow’s headlines will be less bearish. Our respected colleague, Chris Mayer, is not optimistic. “The nuclear power renaissance is dead,” he says flatly in the column below. Chris makes a compelling argument. And it almost never pays to disagree with the man (which is why we almost never do). But we suspect that nuclear power will live to fight another day…and will do so within an “investable timeframe.”

As regular readers of The Daily Reckoning may recall, your editor named uranium as his “Trade of the Decade.” Two months ago, this call looked brilliant (or lucky). Today, not so much. Two months ago, uranium and uranium stocks were both sitting atop plump 50% gains for the decade-to-date. But those gains have shriveled to single digits.

So where to from here?

Admittedly, given the crisis in Japan, uranium might not be the “Trade of 2011.” But we think uranium investments still have a solid shot at performing well throughout the rest of the decade. In other words, we’ll keep dancin’ with the one who brung us – not just for sentimental reasons, but for stone-cold economic reasons. Environmental disasters notwithstanding, nuclear power remains an extremely competitive and compelling alternative to fossil-fuel-powered electricity generation.

The opponents of nuclear power tend to portray the contrast between nukes and hydrocarbon-generated electricity as a choice between adopting a rabid hyena or a Golden Retriever puppy. But the contrast is not quite that extreme or simplistic. A more accurate metaphor might be choosing between sleeping under a guillotine blade every night or sleeping in an airport smoking lounge. As long as the blade never falls, that’s a much better – and healthier – place to sleep.

That’s the nuclear industry’s critical challenge: preventing that blade from falling, no matter what. The newest nuclear technologies purport to achieve exactly that. Meanwhile, the world’s coal-fired power plants are continuously converting the earth’s atmosphere into a smoking lounge. This reality will not change, which is one very big reason why the demise of nuclear power may have been greatly exaggerated.

Nuclear power has played – and continues to play – an essential role in worldwide power generation. More to the point of this discussion, nuclear power’s role is growing most rapidly in the economies of the world that are growing most rapidly. The Fukushima disaster won’t change that trend.

To be sure, the world’s newfound anxieties about nuclear power are probably not nothing; but they may not be very much of anything. For starters, many of the “concerned” individuals who are voicing anti-nuke viewpoints are individuals who happen to have an additional agenda or two in their hip pockets. Many of these individuals are either members of an opposition party in their particular country or are members of some group that has long opposed nuclear power.

In the midst of the crisis, no one wishes to oppose these dissident voices. But once the crisis passes, the dissident voices may have to yell a little louder if they wish to be heard…and these voices might have to yell really, really loudly if the price of crude oil surges toward $150 or $200 a barrel.

Secondly, many of the folks who are issuing the harshest anti-nuke remarks reside in countries like Germany and the US that were already hostile to nuclear power.

The map below, courtesy of the World Nuclear Association, identifies the locations of nuclear power plants that are currently under construction. Of these, 42% reside in China; 16% in Russia and 11% in India. The G-7 countries, combined, account for only 3% of all nuclear plants currently under construction!

So if you are an investor in uranium, do you really care that Germany might not renew some nuclear power licenses or that Switzerland will find a new way to stall construction of three new nuclear plants?

Even in the Developed World, the news for the nuclear industry is not all bad. At the very same moment that the Swiss and the Germans were pandering to their publics, the French, Spanish and Italians were promising full-speed ahead on their nuclear power programs.

“France will continue to rely on nuclear power,” Bloomberg News reports. “Spain, which is extending the life of existing plants, said Fukushima won’t hold back its nuclear policy. Italy’s environment minister said the earthquake won’t make the country reconsider to build new plants.”

“We can’t switch to renewables overnight,” says French Environment Minister Nathalie Kosciusko-Morizet said. “For the foreseeable future, we will need nuclear.”

So will the rest of the world. Net-net, the long-term prognosis for nuclear power may not be as grim as the near-term headlines suggest.

Eric Fry
for The Daily Reckoning

Read more: The Death of the Nuclear Power Renaissance http://dailyreckoning.com/the-death-of-the-nuclear-power-renaissance/#ixzz1GjzsmjUs

Let’s start with Oil and the commitment of traders (COT) report. Note that from 2002-2010 commercial traders cumulative position ranged from short 100K contracts to long 100K contracts. In early 2010 their net short position dipped below 100K contracts before moving closer to neutral around mid-year. Since then, speculators (non-commercials) have gone furiously long the market as the commercial net position has surged to over 300K contracts. I looked at historical charts and this position is a record.

Not only the professional speculators who are long energy so too are the retail players. Our evidence is the Rydex data and chart from sentimentrader.com. This shows fund flows in Rydex’ Energy Fund. The middle column shows assets in the fund and the bottom column shows assets in the fund relative to all other sectors. Needless to say, these metrics have exploded in the last six months.

Keep in mind that sentiment follows the trend. More and more bulls means higher prices. Yet, when there are too many bulls around or too much money going into a market, it poses a short-term risk and creates an environment that is ripe for profit taking. One reason we like energy is because it often peaks after the stock market. For example, if the market peaks in April or May then energy could peak in August or October.

That being said, it is time to be cautious on energy in the near-term. We know little about geopolitics but we do know that there is record speculation in the Oil market and that will end at somepoint. Does it end at $120 Oil or $90 Oil? We don’t know but we do know that there is huge risk in the market with a record speculative long position. Meanwhile, tons of retail players have already piled into the shares and could move out on any sudden change in the situation in the MidEast.

For more analysis and forecasts, consider a free 14-day trial to our Commodities service.

Good Luck!