7/13 - West Texas: Here’s a good picture that pretty well illustrates the condition of the West Texas cotton crop. Spring planting rains were really spotty and most of the non-irrigated crop south of Lubbock has failed (Approximately 1 million acres). No rain means dry soils that equals violent sand storms like this one when storms roll in, off the mountains of New Mexico. This picture was taken just southeast of Lubbock, TX at my daughter’s home in the small lake community of Lake Ransom Canyon. The picture was taken facing to the west and the Lubbock skyline is usually clearly visible from this vantage point and there is a huge electric power generation plant only 3 miles away. This storm was packing 80 MPH winds and the sand literally shreds the young cotton cotyledon leaves that were emerging on the day of this picture (6/18). We lose much more cotton to sand storms like these that we ever lose to a hail storms.

http://zerohedge.blogspot.com/2009/07/is-case-of-quant-trading-industrial.html

US CFTC asks views on oil futures position limits

Wednesday July 08, 2009 01:00:10 AM GMT

WASHINGTON, July 7 (Reuters) - The U.S. regulator of futures markets wants public comment on whether it should set position limits on energy futures that apply across all markets and traders.

The Commodity Futures Trading Commission said it also sought comment on who should qualify for exemptions from position limits. Some lawmakers say hedge exemptions should go only to people who plan to buy a commodity and not those who hedge financial risk.

Oil prices set a record in 2008 and grains contracts surged to historic levels amid complaints that a flood of investor funds distorted the futures markets. Wheat and cotton growers said futures prices zoomed above cash prices.

In a statement released on Tuesday, CFTC Chairman Gary Gensler said CFTC also would revise its weekly Commitment of Traders report to show the activities of swaps dealers and hedge funds. He said the “enhancements” would appear in the near term but did not set a date.

Anti-speculation bills pending in Congress would direct CFTC to set position limits on oil and other energy futures and spell out in its reports the role of swaps and hedge funds in futures markets.

“Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities such as crude oil, heating oil, natural gas, gasoline and other energy products,” said Gensler, who took office on May 26.

He said the hearings during July and August would help determine how CFTC should use its powers to ensure fair trading. No hearing dates or locations were announced.

At present, the CFTC does not set position limits on oil and other energy contracts although futures exchanges do. The CFTC has position limits on some agricultural contracts.

“The commission will be seeking views on applying position limits consistently across all markets and participants, including index funds and managers of exchange-traded funds; whether such limits would enhance market integrity and efficiency; whether CFTC needs additional authority to fully accomplish these goals; and how the commission should determine appropriate levels for each market,” said the statement.

Besides showing hedge fund and swaps positions, the Commitment of Traders report will be modified to show data on foreign contracts linked to U.S. contracts and to show data on contracts that play a leading role in setting prices.

If the DOW reaches 8300 we could see another drop. The charts show what many call a head and shoulders trend. So, if you are a chart person this would mean a sell order should be placed. My advice is never make decisions just on charts. Two, always listen to your gut, trends, and the news. Adding more variables into the equation does complicate things but also gives you a more reliable footing. If everyone says sell and Obama implements a stimulus package people will be caught short. We must be on top of change, which is why going on charts alone is not wise.

The old axiom, “small crops get smaller,” is an important one for this market. What I meanby that is this. The US cotton crop is the smallest I can remember in my carreer, and I’ve been around 30 year……I know that’s why I’m a seasoned professional….Anyway, almost 60% of this year’s crop is focused in Texas and you can’t expect that all to grow. In fact if you look at the progress report from the other day 72% of the Texas cotton crop is fair or lower.

Sure demand will suffer from Z over 60 cents, but tell that to the funds! They see an opportunity and are juming on it. Recall that prior to the “bearish” planting report prices had already advanced. then they dipped in choppy trading, yet still closed up on the day. Its not so much supply and demand for the underlying cotton as it is supply and demand for the futures contracts…..Cotton may be ready to make a good sized move higher. Buy dips.  Looking anything like Sugar ?

mi/

Following yesterday’s massive flushout the market is looking higher this morning as the US dollar again weakens versus the Euro and crude values are stabilize above $70.00.

The overall feel is that agricultural commodities are far undervalued as compared with outside commodities and thus are a great buy at current levels. Take the overnight for example if you doube me. We flushed out plenty of weak length over the previous week leaving only established longs that will not leave.