I’d like to focus this week’s segment on the markets that typically see heightened activity during the summer months, due to the fact that it’s their prime growing season. Specifically, that means the grains and orange juice markets.

As we’ve mentioned before, these products are heavily dependent on the weather for their yield. So if erratic weather patterns affect the crops’ growing cycles, it’s very likely that their prices will rise.

These products aren’t just consumables either. The farmers and food/drink companies that are front-and-center of their production use these markets for income production, too. They do this by using commodity futures and options contracts as hedging mechanisms.

So let’s hit the grains market first…

Bull-Hunting In The Corn And Wheat Markets

In the last issue, we keyed in on corn and wheat, stating: “Most of the speculators who play these markets are bullish in nature, so a majority of them are placing bullish bets, either in the form of outright long futures contracts or long call option contracts.

“Right now might be one of the best times to get into the grain markets on the long side because not only are we right smack in the middle of summer, but the prices of corn and wheat have just undergone a five-week massacre to the downside.”

Both markets are still meandering around their lows, which offers another good opportunity to get in on a speculative bullish move. Here’s how to do it…

How To Play Grain Market Upside

Take a look at the daily charts below for the corn and wheat December 2009 futures contracts.

If you believe in the seasonality of bullish moves for the grains, and are willing to take a speculative bet, now is a good time to consider a trade.

Your best bet is to hit the futures options contracts that trade on the floor of the Chicago Board Of Trade (CBOT). But make sure you do so in a way that gives you limited risk (through call option spreads, for example) and unlimited reward possibilities (through outright call options).

For call options, look to play the December 2009 or March 2010 options expirations, which will give enough time for any major weather scares to produce a good upside run.

Corn: Specifically, consider December 2009 & March 2010 call options with strike price levels from $3.50 and higher.

Wheat: Use the December 2009 and March 2010 call options that have strike prices between $5.60 and $5.80, or higher.

You can also trade these contracts through the Chicago Mercantile Exchange’s electronic platform, where you can bypass the brokers in the option pits. These contracts are exactly the same as the other, so you can trade them whichever way works best for you.

Juicing In July

Having last broken down the orange juice market one month ago, this market has become a hot spot for speculators, as hurricane season got underway.

At the time, the market had carved out a low and we mentioned that it was shaping up for a “potentially lucrative seasonal trade.”

It certainly didn’t disappoint. Over a two-week period, orange juice futures launched higher to the tune of 2700 points. Usually, a move like that will take a good portion of the summer to develop, but with the oversold conditions that existed, it was stronger and quicker than normal.

This served all call option buyers well – especially those who took our advice to buy the January 2010 $85 cent call options. At the time, these options were available to buy for roughly 900 points or lower. And with the 2700-point surge, they tripled in price, fetching prices of over 3000 points.

So what now?

At this point, we wouldn’t advise buying these options anymore. The feverish move has already happened now and OJ prices are beginning to fall back. This is usually a one-time event every year, and unless orange juice drops back down into the low 80-cent area quickly (based on the January 2010 futures), we don’t recommend buying calls at this time. Markets move fast and timing is very crucial.

Lastly, we’ll take a quick look at our other favorite “weather-prone” commodity – natural gas…

Natural Gas Needs A Hurricane-Induced Boost

We’ve been bullish on natural gas for a while now, as it slinks along the lows it’s carved out since it reached manic highs last summer (along with many other commodities).

Natural gas will eventually hit a bottom, as it’s an in-demand natural resource that will be around for a long time. We just have to wait patiently for the turnaround, as the market grapples with high underground storage supplies.

Like with the orange juice market, though, we know hurricanes can cause huge upside moves, as the majority of drilling rigs are centered in the Gulf of Mexico. If a few storms go rumbling through that area, it could be the impetus that eventually brings this commodity out of the doldrums. But until then, we’ll bide our time.

One of the ways we’re playing this market in my Instant Money Trader (IMT) service is by selling out-of-the-money naked put option contracts on the natural gas exchange-traded fund - United States Natural Gas(NYSE: UNG).

This ETF tracks the movements of natural gas futures contracts, giving investors a lower cost way to enter this market.

And by selling put options, it allows us to collect the option premium, while having an opportunity to buy natural gas at unbelievably low historical levels. Check out this article for more information on how to sell put options.And to get on board with IMT, just visit this link.

Source: Grain Hunting: How To Cash In On  The Corn And Wheat Markets

Since many of these commodities are real physical products that we use for consumption purposes, it’s no surprise that these markets rise in price whenever investors suspect an oncoming deficit.

Specifically, grains and other foodstuffs are at the mercy of Mother Nature from the time they are being planted until they can be brought to market. Right now is one of those critical periods, and with that in mind, we’re going to discuss the sectors that are most volatile during these summer months.

Get Going With The Grains

Applied to the commodities market, “the grains,” consist of corn, wheat and soybean futures and options contracts. We see the most speculative interest in these markets from all kinds of participants as what happens often happens fast, with big rewards for those people who know how to play it right.

From May to October, the grains go through their most critical growing cycles, when they rely heavily on ideal weather conditions in order to produce the most bountiful crops.

Of course though, we all know the weather doesn’t always remain ideal just because we ask it to.

And even when the sun does shine when it’s supposed to and the rain falls perfectly on schedule, there’s usually one reason or another to forecast doom and gloom… a shortage of one element, an over-abundance of another, factors that can hinder the crops from meeting their full potential.

Those same variables that have farmers tense and impatient during the summer months, give investors plenty of opportunities to profit though, as the uncertainty more often than not leads to manic moves in the market.

Why The Bulls Are Set To Run Once Again

Most of the speculators who play these markets are bullish in nature, so a majority of them are placing bullish bets, either in the form of outright long futures contracts or long call option contracts.

Right now might be one of the best times to get into the grain markets on the long side. Not only are we right smack in the middle of summer – a season known for it’s weather anomalies – but the prices of corn & wheat have just undergone a five-week massacre to the downside.

With corn and wheat futures hitting very oversold levels, it makes your chances of being profitable with a bullish trade, that much more probable.

If you need further proof, take a look at the daily charts below of December 2009 corn & wheat futures contracts.

Notice how each commodity appears to have fallen off a cliff since early June. This was due to the most recent government supply/demand data showing sizable supplies and planting intentions for each.

Their Panic Is Our Profit

Over my 17 years in the commodity business, I’ve found that nothing can get in the way of a bull run whenever there is a perception that a crop will get wiped out if growing conditions aren’t perfect. It happens every summer, and this one shouldn’t be any different.

If you’re on board with me in this and want to take part of the speculative fever, then your best bet is to go with options contracts that trade on the floor of the Chicago Board Of Trade (CBOT). Stick with limited-risk call option strategies that are for the December 2009 expiration cycle or beyond, as they provide enough time for any major weather scares to still produce a good upside run.

You can look at the December 2009 corn options with strike price levels from $3.50 and higher. And use the December 2009 options that have strike prices of $5.50 and higher for wheat.

Outright call option purchases and call option spreads are a great way to get your feet wet in these markets.

Soybeans, which probably see the most volatile moves during the summer, did not get hit as hard to the downside recently as corn & wheat, so the advantage isn’t as high in that product right now for bullish bets.

Although soybeans could rise as well with any weather interruptions, we like the chances better with corn & wheat.

Orange Juice Futures Could Still Climb Higher

On a final note, I want to draw your attention back to the analysis we did on the orange juice market in the last Commodities Corner.

Right on cue, orange futures have blasted higher in the last few sessions to the tune of 1800 points, putting any recent call option purchases from last week squarely in the black.

This market could remain active over the next few months as the weather, in the form of hurricanes, can send this market to dizzying heights.

Good trading!

Source: How To Play This Government Report And The Ensuing Commodities Craze

Gold hit two historic milestones in 2008. First, it hit its all-time high of $1,030 an ounce in early March.

Just three months later, the price of gold for December delivery fell to $681 an ounce, a 21-month low and 33.9% drop from its record high.

Most gold bugs were equal parts heartbroken and puzzled. Global stock markets tanked alongside the world’s biggest economies. But so did gold, which is widely considered to be a safe haven investment when everything else in spiraling south.

However, Money Morning Contributing Editor Martin Hutchinson- an investment banker with more than 25 years’ experience on Wall Street and Fleet Street and leading expert on the international financial markets- understood perfectly.

“Gold is not a safe haven against recession,” said Hutchinson. “It’s a safe haven against inflation.”

In the past year, commodities prices across the board skyrocketed- especially oil, which hit a record high $147 a barrel. Corn, wheat, and soybeans all hit record highs, as well.

That tightened household and corporate budgets, and was a primary reason why the U.S. economy walked backwards over the third-quarter finish line with -0.3% annualized growth. It was the first quarter of what most economists believe will be the nation’s first recession since 2001.

However, the inflation epidemic that preceded it- and arguably contributed to it- has waned significantly, as global demand for raw materials has slumped.

Prices for staple foods such as corn, soybeans and wheat have all come down from their record highs in near tandem.

Corn futures are down nearly 50% from their summer high of $8 per bushel. The same is true of soybeans and wheat, as each have lost roughly half their value. In fact, wheat hit a 16-month low in mid-October.

As most of us noticed, gas prices have fallen 48% from their July 17 high of $4.114 a gallon.

And not coincidentally, gold has fallen 22% in that same time frame.

However, this report examines the pending “re-re-correction” of commodities- the slow and steady rise of commodities after the roller coaster of record-high inflationary highs and a sudden breakneck fall below real value- to find the charted path of gold prices in 2009.

But it also reveals another wild card inflationary indicator that Hutchinson believes carry gold prices to $1,500 an ounce by the end of 2009…

Two Catalysts For Gold’s Climb

The U.S. Department of Agriculture’s Oct. 10 Crop Production Report said acreage for a handful of staple food commodities has shrunk:

• Corn acreage fell 1.2%.
• Soybean acreage dropped 1.4%.
• Canola acreage dropped 1.9%.
• Sunflower acreage shrank 0.8%.
• And acreage of dry edible beans fell 0.7%.

That naturally translates to higher prices because a squeezed supply increases demand, especially from the growing economies and populations in China, India and Latin America.

But Hutchinson believes another caveat in the cracks of our economy’s recovery will spell a sharp rebound in gold prices… one that could catapult it to $1,500 by the end of 2009.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

The U.S. government’s historic bailout pumped $700 billion into its failing banking system… all to give banks back the capital they squandered in doling out defaulting loans.

Since September 2007, Ben Bernanke and the Federal Reserve have cut interest rates nine times- from 5.25% down to the current 1.0% rate- to increase bank-to-bank lending and bank-to-consumer lending.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

And by the time is does, food prices should begin ticking upward, adding another set of thrusters to gold prices.

“Everybody thinks that because we’re having a horrible recession, we’re not to go have inflation. I think that’s probably wrong,” Hutchinson said. “I think gold has quite good hidden-store value.”

Should gold reach Hutchinson’s top-range price of $1,500 an ounce, it won’t be its real value. Just like how its deflated price now doesn’t reflect real value either.

Rather, $1,500 an ounce would be the marked-up price caused by another inflation-fueled investor flood into the yellow metal.

“As gold goes up, it gets more popular and investors start piling into it,” Hutchinson said.

And if gold gets anywhere near the $1,500 mark, sell. Prices that high will likely fall back or plateau as the Federal Reserve begins raising interest rates and strengthening the U.S. dollar, Hutchinson said.

Five Ways to Play Bottom-Basement Gold

Before we get too far ahead of ourselves, let’s first look at five ways to play bottom-basement gold.

SPDR Gold Trust ETF (GLD)- formerly StreetTracks Gold- is a fund whose shares are intended to parallel the movement of gold prices. Since gold prices started falling along with gas prices, SPDR Gold Trust has stayed within a 0.5% margin of gold prices. This ETF eliminates any investor concern over storage and delivery while giving them exactly what they want- gold.

Toronto-based Barrick Gold Corp. (ABX) has 27 mines, mostly in North America and South America, and is developing or exploring 11 more. With a market cap of more than $20 billion, it has considerably more liquidity than most mining companies. Barrick is primarily a gold miner, but it also has copper and zinc mining operations. As far as investors are concerned, there are two ways to look at that: It’s not a pure play, per se, but then again, this is a company stock not a brick of bullion. Also, having operations other than gold can help stabilize the company’s bottom line in case problems arise at a gold mine.

Denver-based Newmont Mining Corp. (NEM) is primarily a gold producer with operations in the U.S., Australia, Peru, Indonesia, Canada, New Zealand and Mexico. Its reserves are hovering around 86.5 million ounces. Like Barrick, this is a mining stock play, and it subject to market swings on top of fluctuations of gold prices. That can be a significant tailwind, especially if you believe the stock market has bottomed out or is close to doing so. Hutchinson- forever a value-minded investor- warned that Newmont might be a little too pricey now. Investors may want to wait for the company’s stock price to settle before getting in.

Hutchinson thinks the best value for a gold mining stock can be found in Yamana Gold Inc. (AUY), another Toronto-based company that’s small now, but has rapidly expanding production. 

But for investors who just want gold- not an ETF or stock- the best avenue is an EverBank Select Metals Account: EverBank accounts has a minimum deposit that is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals’ brokers and bullion banks. It offers two types of gold accounts: Unallocated (Your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs. $5,000 minimum deposit.) and Allocated (You directly own the gold you purchase, held in your own private account. $7,500 minimum deposit.) Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

We should point out that the publisher of Money Morning has a marketing relationship with EverBank, but that’s because its products are best in show.

Source: Outlook 2009: Five Ways to Play Gold’s Steady Advance

The world’s stock markets tanked, as did some of its biggest economies. In such an environment, they thought, gold should have risen. After all, gold is widely considered to be a safe-haven investment when everything else is spiraling south.

However, Money Morning Contributing Editor Martin Hutchinson – an investment banker with more than 25 years’ experience on Wall Street and a leading expert on the international financial markets – understood perfectly what other investors did not.

“Gold is not a safe haven against recession,” said Hutchinson. “It’s a safe haven against inflation.”

In the past year, commodities prices skyrocketed – across the board. That was especially true of oil, which hit a record high $147 a barrel. Corn, wheat, and soybeans all hit record highs, as well.

That price escalation tightened household and corporate budgets, and was a primary reason why the U.S. economy posted a gross-domestic product (GDP) decline of 0.3%. With that negative growth, the third quarter was the beginning of what many experts believe will be the nation’s first recession since 2001.

However, the inflation epidemic has waned significantly, as global demand for raw materials has plummeted.

Price for such staple foods as corn, soybeans and wheat have all come down from their record highs – in near-lockstep fashion.

Corn futures are down nearly 50% from their summer high of $8 per bushel. The same is true of soybeans and wheat, with each having lost roughly half their value. In fact, wheat hit a 16-month low in mid-October.

As most of us noticed, gas prices have fallen 48% from their July 17 high of $4.114 a gallon.

And not coincidentally, gold has fallen 22% in that same time frame.

However, this report examines the pending commodities rebound – a projected slow-and-steady increase in commodity prices that will reverse the breakneck plunge below fair value that commodities have experienced for much of this year.

Our objective now: To chart the expected path of gold prices in the New Year.

This report also reveals another wild card inflationary indicator that Hutchinson believes will carry gold prices to $1,500 an ounce by the end of 2009.

Two Catalysts For Gold’s Climb

The U.S. Department of Agriculture’s Oct. 10 Crop Production Report said acreage for a handful of staple food commodities has shrunk:

• Corn acreage fell 1.2%.
• Soybean acreage dropped 1.4%.
• Canola acreage dropped 1.9%.
• Sunflower acreage shrank 0.8%.
• And acreage of dry edible beans fell 0.7%.

That naturally translates to higher prices because it squeezes the supply of the particular commodity. And it does so at a time when demand continues to escalate from populations in China, India and Latin America. And higher prices equal inflation.

But Hutchinson – who correctly predicted this last run-up in gold prices – says there’s another catalyst that’s right now inherent in the U.S. economy that could help vault gold prices to $1,500 an ounce by the end of 2009. And it has to do with the much-ballyhooed $700 billion rescue plan.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

The philosophy behind the rescue plan is elegantly simple: By providing a portion of the $700 billion to foundering U.S banks, the Treasury Department believed it could provide banks with badly needed capital, and get them to start lending money once again – jump-starting the economy in the process.

Since September 2007, U.S. Federal Reserve policymakers have cut the benchmark Federal Funds target rate nine times – from 5.25% down to the current 1.0% rate – to increase bank-to-bank lending and bank-to-consumer lending.

“The government is pumping money in so many banks, and that money has to come out somewhere,” Hutchinson said.

Right now, banks aren’t boosting lending. Instead, they are using the cash to finance buyouts of other banks. Even so, that money will “come out” into the economy in the form of higher stock prices for banks. That will make consumer/investors wealthier, and could make them more confidence in the economy. If they’re more confident, they will spend. As that happens, food prices should begin ticking upward, adding another set of thrusters to gold prices.

“Everybody thinks that because we’re having a horrible recession, we’re not to going have inflation. I think that’s probably wrong,” Hutchinson said. “I think gold has quite good hidden-store value.”

As gold prices increase, count on more investors leaving the sidelines to invest, too, causing the surge in gold prices to accelerate and steepen.

“As gold goes up, it gets more popular and investors start piling into it,” Hutchinson said.

And if gold gets anywhere near the $1,500 mark, sell. Prices that high will likely fall back or plateau as the Federal Reserve begins raising interest rates and strengthening the U.S. dollar, Hutchinson said.

Five Ways to Play Bottom-Basement Gold

Before we get too far ahead of ourselves, let’s first look at five ways to play bargain-basement gold prices.

The SPDR Gold Trust ETF (GLD) – formerly StreetTracks Gold – is a fund whose shares are intended to parallel the movement of gold prices. Since gold prices started falling along with gas prices, SPDR Gold Trust has stayed within a 0.5% margin of gold prices. This exchange-traded fund (ETF) eliminates any investor concern over storage and delivery while giving them exactly what they want – gold.

Toronto-based Barrick Gold Corp. (ABX) has 27 mines, mostly in North America and South America, and is developing or exploring 11 more. With a market cap of more than $20 billion, it has considerably more liquidity than most mining companies. Barrick is primarily a gold miner, but it also has copper and zinc mining operations. As far as investors are concerned, there are two ways to look at that: It’s not a pure play, per se, but then again, this is a company stock, not a bar of bullion. Also, having operations other than gold can help stabilize the company’s bottom line in case problems arise at a gold mine.

Denver-based Newmont Mining Corp. (NEM) is primarily a gold producer with operations in the United States, Australia, Peru, Indonesia, Canada, New Zealand and Mexico. Its reserves are hovering around 86.5 million ounces. Like Barrick, this is a mining stock play, and is subject to market swings – as well as fluctuations in gold prices. That can be a significant tailwind, especially if you believe the stock market has bottomed out or is close to doing so. Hutchinson – forever a value-oriented investor – warned that Newmont might be a little too pricey now. Investors may want to wait for the company’s stock price to settle before getting in.

Hutchinson thinks the best value for a gold mining stock can be found in Yamana Gold Inc. (AUY), another Toronto-based company that’s small now, but has rapidly expanding production. 

But for investors who just want gold – not an ETF or stock – the best avenue is an EverBank Select Metals Account: EverBank accounts has a minimum deposit that is 98% lower than its competitors, and its commission costs are up to 86% lower than other metals’ brokers and bullion banks. It offers two types of gold accounts: Unallocated (your purchased gold is pooled with that of other investors, eliminating storage and maintenance costs; the minimum deposit is $5,000), and Allocated (you directly own the gold you purchase, held in your own private account; $7,500 is the minimum deposit here).

Both types of accounts can be set up 24/7 online. But if you prefer the phone, call 866-326-6241, and be sure to give them the code 12608 when setting up an account.

We should point out that the publisher of Money Morning has a marketing relationship with EverBank, but that’s because its products are among the best in class.

Source: Five Ways to Play Gold’s Rebound to $1,500 an Ounce

[Editor's Note: With the New Year upon us, it's a good time for investors to be looking ahead. With that in mind, Money Morning will be running installments of our "Outlook 2009" economic forecasting series into the New Year.]

“October is at last ending – the worst month in commodity history,” Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt, told Bloomberg. “Investors are expecting lower growth for the longer term and that is putting prices under pressure.”

The news came one day after the revelation that the U.S. economy shrank 0.3% in the third quarter, and on the very same day that the government announced consumer spending tumbled 0.3% in September – meaning the world’s largest economy is struggling to produce and purchase.

It also continues a steady, months-long decline of commodity prices.

The past year’s inflation epidemic has waned significantly because consumer spending and demand has significantly cooled.

Prices for staple foods such as corn, soybeans and wheat have all come down from their record highs in near perfect harmony.

Corn futures are down nearly 50% from their summer high of $8 per bushel. Same story and stats for soybeans and wheat, the latter hitting a 16-month low in mid-October.

Gas prices have fallen 37.1% from their July 17 high of $4.114 a gallon.

Not coincidentally, gold has fallen 21.1% in that same time frame.

Short-term prices are likely to continue to wane or tread water, as economies around the world are hording their pennies and trying to build capital to start buying again.

“The outlook for demand remains weak while we wait for economic rescue measures to feed their way through the system,” Christopher Bellew, senior broker at Bache Commodities Ltd. in London, told Bloomberg. “Even in emerging markets the growth there is likely to be lower than was previously expected.”

Source: Commodity Prices Sinking to 52-Year Low

Reuters reports that “front month July corn on the Chicago Board of Trade rose to a contract high of $7.57-3/4 a bushel, up more than 3.5 percent from Friday’s close, while July 2009 soared to an all-time peak of $8.07.”

Get ready to pay through the nose for food, says Brian Hunt in DailyWealth:

The states of Iowa and Illinois are the world capitals of corn production. Over 27 million acres there are devoted to growing corn. They anchor production for the world’s top corn-exporting nation. All that rain keeps farmers out of the field and damages the crop. Corn soared 11% this week as a result.

The most active corn contract has increased 86% in the past year. Corn is the chief feedstock for cattle, pigs, and chicken. It’s a primary ingredient in soda pop and cereals. To learn just how pervasive corn is in your life, we recommend reading the excellent book, The Omnivore’s Dilemma. Read it and
get ready to pay out the nose for food…

“After this latest rainout, many corn farmers will switch to soybeans, which can be planted until the end of June with less impact on yields,” says Justice Litle. “And that means the corn that does grow will be much more valuable.”

Jurojin already recommended our subscribers go long corn last week — after it bounced higher off of its 50-day moving average. Now, they’re racking up nice open gains, and our first profit target looms dead ahead.

Is it too late to get in on corn? Not by a long shot. We’ve seen this kind of horrible start to the crop year before — in 1993. Then, traders were slow to react to massive flooding.

The best way to play this is corn futures or options on corn futures. If you aren’t in the futures market, you could try the PowerShares DB Agriculture ETF (DBA), which tracks a basket of corn, wheat, soybeans and sugar.

Note: This analysis is brought to you by the Secret Order of Jurojin.

“Corn is in trouble because of the wet spring that has drenched the midwest,” says Justice Litle in Taipan Daily.

Yesterday, the USDA said in a report that American corn output will be down significantly from last year’s estimate.

And that forecast was put together before the biblical drenching the Midwest suffered in the past week, when another 12 inches of rain flooded already saturated fields.

All this is sending corn futures soaring. Looking at the chart, you can see how corn has gone ballistic. Also, on the bottom of the chart, RSI (a momentum oscillator) has just given a bullish buy signal.

After this latest rainout, many corn farmers will switch to soybeans, which can be planted until the end of June with less impact on yields. And that means the corn that does grow will be much more valuable.

Jurojin already recommended our subscribers go long corn last week — after it bounced higher off of its 50-day moving average. Now, they’re racking up nice open gains, and our first profit target looms dead ahead.

Is it too late to get in on corn? Not by a long shot. We’ve seen this kind of horrible start to the crop year before — in 1993. Then, traders were slow to react to massive flooding.

The best way to play this is corn futures or options on corn futures. If you aren’t in the futures market, you could try the PowerShares DB Agriculture ETF (DBA), which tracks a basket of corn, wheat, soybeans and sugar.

“Corn is going to go higher,” says John Mauldin in his Outside the Box.

Bad weather has meant that not enough got planted, and that will probably hurt yields in the fall. This is going to mean even higher meat prices and ethanol prices. Corn ethanol is such a bad idea. This is what happens when government decides to mess with the market.

Anecdotal inflation note: I eat two chicken fajita pitas without cheese from Jack-in-the Box for lunch about three times a week (after the gym!). I throw away the pita bread and just eat the chicken at my desk. The last three days the price has been the same, but the amount of chicken is noticeably smaller, perhaps 25% smaller. Where’s the hedonic price adjustment in the BLS statistics for that? A friend of mine notes that the filet from his favorite steak house is now seven ounces instead of eight. But the steak is still the same price. Maybe portion control will finally get America to go on a diet.

And that forecast was put together before the biblical drenching the Midwest suffered in the past week, when another 12 inches of rain flooded already saturated fields.

All this is sending corn futures soaring. Looking at the chart, you can see how corn has gone ballistic. Also, on the bottom of the chart, RSI (a momentum oscillator) has just given a bullish buy signal.

After this latest rainout, many corn farmers will switch to soybeans, which can be planted until the end of June with less impact on yields. And that means the corn that does grow will be much more valuable.

Jurojin already recommended our subscribers go long corn last week — after it bounced higher off of its 50-day moving average. Now, they’re racking up nice open gains, and our first profit target looms dead ahead.

Is it too late to get in on corn? Not by a long shot. We’ve seen this kind of horrible start to the crop year before — in 1993. Then, traders were slow to react to massive flooding.

The best way to play this is corn futures or options on corn futures. If you aren’t in the futures market, you could try the PowerShares DB Agriculture ETF (DBA), which tracks a basket of corn, wheat, soybeans and sugar.
This analysis is brought to you by the Secret Order of Jurojin.

Source: King Corn Retakes the Throne

• The U.S. Federal Reserve released its Beige Book yesterday (Wednesday), a look at the economic conditions in the central bank’s 12 regions. Overall economic activity was slower in April and May. “Three Districts described economic activity as softer, weaker, or lower, with an additional four Districts reporting slower, sluggish, or modest economic growth. The remaining five Districts of Philadelphia, Cleveland, Atlanta, St. Louis, and San Francisco described activity as stable or little changed in recent weeks,” the report read. While it is clear the economy is slowing, it has yet to experience a true contraction, clearing the way for the Fed to intensify its focus on inflation rather than recession.

• Japanese drugmaker Daiichi Sankyo Co. said it will buy a controlling stake (50.1%) of India’s biggest pharmaceutical company, Ranbaxy Laboratories Ltd., (OTC:RBXLY) for up to $4.6 billion, Bloomberg reported. The addition of the fast-growing generic-brand company reflects the shifting tides in the pharmaceutical industry, as brand-medicine providers are losing considerable market share to generic drug providers.

• As retail sales have soured in the past year, U.S. liquidator retailer Big Lots Inc.’s (BIG) Chief Executive Steve Fishman said the company is “highly motivated” to expand its stores by up to one-third, Reuters reported. The Columbus-based company currently has 1,353 in 47 states, and expansion is contingent on the real estate market cooling down for better location prices, Fishman said.

• U.S. corn futures climbed more than 4% to a record high for the fifth consecutive trading session yesterday (Wednesday) as flooding expanded in the Midwest, the Associated Press reported. July 2009 Corn contracts soared to a record $7.56-1/4, surpassing the record of $7.35 set in during Asian trading hours. By midday, U.S. corn for July 2008 delivery had hit $7.03-1/4 per bushel. Corn prices on the Chicago Board of Trade have surged 80 percent over the past year.

• Caterpillar Inc. (CAT) yesterday (Wednesday) declared a regular cash dividend of 42 cents per share, a 17% increase to its prior payout of 36 cents per share, The Associated Press reported. The dividend is payable Aug. 20 to stockholders of record on July 21.

• Four Russian billionaires who co-own the troubled joint venture TNK-BP will take legal action against their partner BP PLC (BP) in two separate cities – Stockholm and Moscow, Reuters reported. The decision comes in the wake of failed discussions concerning the fate of TNK-BP President Robert Dudley. The Russians said they decided to act after BP failed to agree to a set of specific demands by a Wednesday deadline. One of these was that the venture’s American manager should be fired.

• Shares of Martha Stewart Living Omnimedia Inc. (MSO) dropped 6% after President Chief Executive Officer Susan Lyne announced her resignation yesterday (Wednesday). Two high-level executives will replace her, MarketWatch reported. The stock lost 48 cents to close at $7.50.

• Office supply giant Staples Inc. (SPLS) has finally come to an agreement with Corporate Express NV (ADR: CXP) to purchase the Dutch firm for $4.8 billion. Corporate Express Chief Executive Officer Peter Ventress will become president of Staples International, a new position that will oversee Staples’ business outside of the United States and Canada. He will report to Ron Sargent, Staples’ president and CEO, The East Bay Business Times reported.

Source: Global Investing Roundups: Thursday, June 12th, 2008