Uncharted Waters

August 16, 2012
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The buzz now is that transport on the Mississippi River is facing greater expense, delay and disruption.  Increasingly the Mississippi is a one-way river as barges heading north have to wait for traffic headed south, adding to the costly delays. The big issue relates to the use of ports (see video). The river itself resembles a clogged artery.    In the U.S., 60 percent of grain, 22 percent of oil and natural gas and 20 percent of coal travels down the river. If the Mississippi River is closed to water traffic, these goods will need to be transported by truck or train – costing the U.S. an additional $300 million per day. Even if temporary, this would be disruptive to critical re-industrialization supply lines. MSNBC has a through article about this.  NOAA has a stream flow projection (28 day forecast for each station)  that suggests the river will gradually drop an additional two feet through mid- September based on current rainfall forecasts.

 

Image source: NBC

Beyond the CHK blow-up potential,  it also seems the markets may not be taking into account the impact of the drought on fracking operations. Delays are already being reported and the cost of water is heading much higher, adding to expenses (CNN: Drought Hurting Oil Fracking Production).   Fracking uses 4.5 million gallons of water per well.   Just one more reason to back away from any bullish speculation right now in this sector.

If you are thinking the strange weather is transient, according to Professor Marco Tedesco of the Cryosphere Processes Laboratory, at The City College of New York,  the cumulative melting index for the entire Greenland ice sheet on August 8th surpassed the record value that was set in 2010 for the entire melt season, which normally ends in early-mid September.

China Daily reports the wholesale prices of 18 types of vegetables in 36 cities rose for the fourth consecutive week, up 2.9 percent week-on-week and 15.4 percent cumulatively over the past four weeks. Last week, the retail price of eggs rose 1.1 percent from a week earlier, but remained down 5.2 percent from the same period last year. The price of pork, a staple meat in China, rebounded 0.4 percent from a week earlier, the ministry said. Food prices account for nearly one-third of the prices used to calculate China’s consumer price index

A time lapse chart showing Fed taking over bond market. It is hard for me to envision that the Fed owns much of anything in the way of ”bargains” since almost everything was bought during the last three years of low coupons. Does this seem like a well functioning system (sistema)?  They are trapped.

 

2 Responses to Uncharted Waters

  1. oot der hoos on August 18, 2012 at 10:45 am

    This guy, Chris Olson has interesting information about the crop estimates:

    “Actually the reports were always bogus anyway because USDA tried to
    manipulate prices by sometimes exaggerating production numbers. But
    they could never control the markets with these schemes and when grain
    buyers start asking questions about where the grain is that USDA says is
    supposed to be there, then the government just loses credibility”.

    http://www.fieldlines.com/index.php/topic,146735.msg1011349.html#msg1011349

  2. oot der hoos on August 18, 2012 at 11:24 am

    I am working through all his posts. I think you will like them:

    But USDA is famous for fudging numbers to keep the fear levels down.
    When the real numbers come in after the combines roll this fall it’s
    going to be downright scary.

    http://www.fieldlines.com/index.php/topic,146735.msg1011493.html#msg1011493

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