Lost Einsteins & The Fading American Dream

Nadarajan “Raj” Chetty is an American economist. He has just announced that he will leave Stanford University, and return to the Banks of the Charles River, Boston, and Harvard University. Professor Chetty will add valuable insights into the field of public economics.

Professor Raj Chetty, ”Lost Einsteins” a paper written on the inventions and inequality

produced work deepening our understanding of relative intergenerational mobility, the role of place, gender gaps in opportunity and life expectancy, how colleges act to both disrupt and reinforce inequality, and the importance of good teachers in our schools and kindergarten classrooms.

Source :

Brookings Institute

Harvard University

Econpapers.com

-R.W.N II

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The Lows of Corn

 

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Corn finished trading on Friday higher, with the USDA World Ending Stocks indicating fears over trade tariffs against China by the United States are now fully reflected in the current price of corn.

The massive liquidations in positions upon the announcement of tariffs on Chinese good, has stripped any and all weather premium as we get further along into June and with it comes hotter weather across the growing region. Specifically this weekend with the un-forecasted high temperatures being experienced in the North.

This can indicate that the market has cleansed itself, in a way, of the underwater length, with Front-month July corn losing  4.37% on the week and December corn fell to within 1 1/4 cents of the life of contract low in the overnight session.

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However, Tuesday’s USDA supply/demand report was supportive and expectations are now that a solid demand bid is in place within the corn market moving forward.

With that said, Trendline yields are needed this year, otherwise ending stocks will continue to decline. The USDA increased its estimate of US 2017/19 crop exports by 75 million bushels to 2.300 billion, which would be the highest export figure for the United States since 2007/08.

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The export pace in April was a record, and the inspection data for May implies continued global demand for United States corn.

The April export figure is enhanced further by reports that South American corn production is down 21.5 million tonnes from last year, which is roughly 845 million bushels. Further, Ukrainian and Russian corn crops are also on the decline.

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With those world crop production figures the USA has pegged United States exports for 2018/19 at 2.100 billion bushels, which is likely 200 to 250 million bushels to low.

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On the other hand, Informa’s updated corn acreage estimate this week was 88/706 million acres compared to the USDA March planting estimate at 88.02 million acres. Their previous estimate was 89.0 million.

To wit: Informa is using a 174.5 bushel per acre yield, with production at 14.216 billion bushels and using their acreage and yield estimates, bumping the USDA’s export estimate to 2.350 billion bushels, equating to world ending stocks at 1.369 billion bushels and the stocks to usage ratio at 9.2%, the lowest figure since 2013/14 crop.

Using the same scenario but with a yield equal to last year’s record 176.6 bushels per acre would leave ending stocks at 1.539 billion bushels and the stocks/usgae at 10.4%.

However, it’s hard to ascertain whether a directional view can be derived by this data. For instance, last year on this date, ending stocks projections at 2.110 billion bushels, December Corn was trading at $3.95 1/2, 17 3/4 cents higher than today’s low of $3.77 3/4.

In addition to the bear case is the most recent Crop Conditions report that showed 77% of the United States corn crop was rated good/excellent compared to 78% last week and 67% last year. The 10-year average for this time of year is 69%. While the top three producing states of Iowa, Illinois and Nebraska have good/excellent ( G/EX ) ratings at 81%, 82% amd 86% respectively; this weekend’s temperatures will likely stress the crops in some of those areas.

The bottom line is that there are still many chances for adverse weather to affect the crop, with pollination periods likely to start in early July.

Regarding the positioning of managed money traders in this week’s C.O.T report showed a decline of 77,282 versus last week reduction of 88,828 contracts. This brings their net long as of June 12th to just 36,126 contracts.

In conjunction with the technical action shown in December Corn on Friday would suggest a market that is closing in on a near-term low. Friday’s low at $3.77 3/4 was just 1 1/2 cents above the contract low at $3.76 1/4, made on September 1, 2016.

What I’ll be watching this week is December Corn trading up to $4.03 1/4 and as low as $3.76 1/4. Moreover, I’l be watching the September Corn $4.00/$$.50 bull call spread.

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Source: 

Hightower Report

CME Group

USDA

NOAA

Informa

 

-R.W. N II

Natural Gas Seasonality

In this post, I’m trying to work through a process of understanding in regards to the seasonality of Natural Gas leading into the month of July.

Here are the facts I’ve collected from more established market participants on the matter:

Thursday’s inventory report showed an increase of 96 bcf versus the average estimate calling for a 90 bcf increase and a five year average injection of 91 bcf.

Total inventories as of June 8th are at 1,913 bcf, 21% below the five year average and 29% below year ago levels.

Over the last four weeks, natural gas storage has increased 375 bcf. Even with the slightly higher injection, the market is cautious ahead of the weekend, as hot weather is expected to move into the Plains, Midwest and East Coast for the next five days.

Temperatures in Chicago could reach 96 degrees on Sunday. Cooling demand will be on the rise over the next week, with natural gas output already up 2.96 bcf per day, up 4.1% from a year ago and a record for this time of year.

Weather and seasonality always plays a role in the price of Natural Gas. The weather that is expected and is hot in the southern and northern regions of the country adding to the slight Bid up in price on Friday. As July Nat Gas finished up 0.06 @ 3.03.

When it comes to the seasonality, the bid incoming to end, as Nat Gas typically peaks during the third or fourth week in June. Then followed by a precipitous decline in toward the middle part of summer into the fall simply because of the amount of stockpiles in inventory.

However, this year we are 507 billion cubic feet below the five-year average and 785 billion cubic feet below the inventory this time last year. This could keep a slight floor under Nat Gas and a close eye will be heeded Ronan extension of price through the 3.00 mark. Expectations of an 8-10 cent move above 3.00.

Source:

EIA.GOV

@chigrl on Twitter

CME Group

BarChart

CFTC

-R.W.N II

Animated Timeline….

First Donald Trump told flyover America that China was largely to blame for the decline of American manufacturing. (September 26, 2016)

Then, flyover America elected Donald Trump. Then, Donald Trump made Peter Navarro trade czar.

(December 19, 2016)

In January Trump took the first baby steps towards what has since morphed into an all-out trade war by slapping tariffs on residential washing machines.

Read more here: | https://www.google.com/amp/s/heisenbergreport.com/2018/01/23/money-laundering/amp/

(January 23,2018)

Steve Mnuchin made things worse by jawboning the dollar lower in Davos less than 48 hours later ( and don’t forgot those boots.)

Read more here: | https://www.google.com/amp/s/heisenbergreport.com/2018/01/24/mnuchin-sinks-dollar-from-davos/amp/

(January 24,2018)

February Navarro and Wilbur Ross saw an opportunity to parlay Trump’s consternation at the exit of Hope Hicks

into the announcement of steel and aluminum tariffs.

Read more here: | https://www.google.com/amp/s/heisenbergreport.com/2018/03/01/trump-starts-trade-war-steel-tariffs-drag-jack-daniels-hogs-into-absurd-transatlantic-tit-for-tat/amp/

That announcement prompted Cohn’s resignation.

Read more here: | https://www.google.com/amp/s/seekingalpha.com/amp/article/4153974-make-gary-cohn-bombshell?source=images

(March 6,2018)

Wilbur Ross showed up on CNBC with a can of Campbell’s soup he said he bought at a local gas station in Florida.

Read more here: | https://www.google.com/amp/s/heisenbergreport.com/2018/03/02/wilbur-ross-shows-up-on-cnbc-with-a-can-of-campbells-soup-to-defend-tariffs/amp/?source=images

Larry Kudlow replaced Cohn, reviving hopes that Trump would call off the trade war.

Read more here: | https://dealbreaker.com/2018/03/jim-cramer-says-larry-kudlow-is-getting-gary-cohns-old-job-and-were-like-¯_ツ_¯/

Three weeks later, the USTR published a list of Chinese products Trump intended to subject to tariffs in connection with the 301 probe. China retaliated immediately

Read more here: | https://www.google.com/amp/s/heisenbergreport.com/2018/05/20/steve-mnuchin-calls-off-trade-war-with-china-that-trump-said-america-wasnt-in/amp/

Trump lost his shit and suggested he would slap tariffs on another $100 billion worth of Chinese imports which meant that the total amount of goods subject to tariffs would exceed the total amount of goods America imports from China in a given year.

A month after that, Navarro was sidelined from trade negotiations with China after reportedly getting into a profanity-laced shouting match with Mnuchin in Beijing.

Read more here: by Thornton Mcenry | https://dealbreaker.com/2018/05/peter-navarro-sidelined-from-china-trade-talks-because-hes-peter-fing-navarro/

And it was rational Mnuchin who struck a truce with China and told Fox that the trade war was “on hold”.

Navarro and Steve Bannon (who started running his mouth to Bloomberg about Mnuchin selling out America) were furious and the backlash from the isolationist contingent caused Trump to change his mind.

Monday night Larry Kudlow had an actual heart attack.

Fast forward two weeks from that abrupt about-face and you land on Thursday evening,

when the White House confirmed that Trump would indeed be slapping $50 billion in Chinese goods with tariffs.

Read more here: | https://www.google.com/amp/s/heisenbergreport.com/2018/06/14/trump-approves-tariffs-on-50-billion-in-chinese-goods-escalating-trade-war/amp/

Friday morning, reports suggested that should China retaliate, Trump would go ahead and publish another list and subsequently make good on the promise mentioned above to take things all the way to $150 billion in total goods taxed.

Rounding out the absurdity, Trump, in the official announcement Friday morning, maintained that he and Xi still have a “great friendship.”

Read more here: | https://heisenbergreport.com/2018/06/15/were-gonna-need-more-chocolate-cake-trump-touts-great-friendship-with-xi-in-official-china-tariff-announcement/