Weekender

The crop gurus at Allendale up the road a couple miles from us have released an incredible report on the corn market. We, and I can assure you Izzy at FT, will be incorporating this report into our Abundance Economics "too much of everything" theme. An average 2012 price of $7.25/bushel (a price associated with prior bull market highs) is predicted to fall toward $4.50. As frustrated floor traders moved into the Grain Room and morphed into "Ag Experts", the fundamentals moved to the back burner. After the "terrible" crop of last year, inventories are estimated to be 45% higher than predicted. Production is up 30% and 2 million extra acres are to be planted. The estimate is for 157 bushels/ acre up from 123. NOTE: ALL information from Allendale Ag Research McHenry Il.

I would only add 3 weather anecdotes that I was taught in the 1980's.

http://www.hispanicallyspeakingnews.com/latino-daily-news/details/animapocalypse-continues-in-peru-dolphins-fish-pelicans-found-dead/21287/

1 )this article has connections to the Peruvian Anchovy harvest, a vital marine and agriculture protein. Somethings up.

2) The Maverick's Surf competition went off last week for the first time since 2010, confirming a shifting tidal water.

3) The PGA Tour Southern California swing is starting under persistent rain.

All of these activities (Maverick's was just  being adventured) were evident before the 1988 Mid-West Summer Omega block drought. Which brings us to:

Negative rates and CB distorted term structures (Contango and Backwardation to futures curves) are the tinder of the next market disruption,  whether the flux is financial or commodity driven (both?) we remain unsure and on watch,

This brings us to The Atlantic cover story on banks and the dissecting of Wells Fargo's balance sheet. If we are correct, and the Fed will be re-calibrating its policies and compasses, then the term structure distortion risk will remain in rates and financial institutions. If we are wrong about the Fed, we suggest you keep Allendale's phone number handy. Our contacts in the Ag Co-Ops have indicated that Dodd-Frank is already crimping their activities as they are registered as hedgers. Strangely. we have not picked up that complaint from our contacts in the banks/PDs. We would guess the oversight is increasing daily. Moreover, The Atlantic's eye opening probe of activities labeled "customer accommodation" should not be missed.

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