QUESTION...

When Sheena Easton was taking her Morning Train and when Dolly Parton was working 9 to 5, who was being sworn in as president of the United States?

Well, that was the year that Mark Chapman was convicted of killing pop legend John Lennon. It was the same year that Bob Marley died. Got it yet?

Life was sweet for Ronald Reagan when he swept to power at the White House as the 40th President, but sweet was expensive back in those days. On Thursday sugar prices in New York reached their highest since 1981 at 19.8 cents per pound. We've been hammering the table with the fundamental driving forces conspiring to create a shortage. Sugar prices took out the February 2006 peak on Thursday, which tells you just how ferocious this rally really is on a fundamental basis.

We put our money where our mouths are on Tuesday as we recommended sugar call options to readers of Jurojin Weekly. Just two days later they took a neat 12% gain as too little rain in India and too much rain in Brazil - the world's two top producers - fed the buying frenzy. Readers are still watching for possibly more gains to come from this position.

Copper - While traders might be on a sugar-high, copper prices took a reality-check at the same time. Prices have doubled this year in the face of close to insatiable Chinese-state buying as the government conveniently uses hard assets to diversify out of the dollar, which earlier in the year they feared might be heading into the doldrums. Being the largest owner of U.S. government debt you might perhaps see why the Chinese are just a shade worried by that prospect.

The price of copper futures felt the fallout from a boost in the value of the dollar as traders bought it after a U.S. report showed an unexpected decline in service sector activity. Speculators didn't need to hear about a threat to the recovery. The way the currency market reacts is to buy dollars on weak economic news and sell it as the U.S. economy recovers. And given the inverse dollar-commodity price relationship, commodities don't need to see an opportunity for a dollar rally at this point especially after the significant run higher of late.

A 14% price surge in the September contract since one week ago was rudely interrupted Thursday with a 2.1% decline to $2.752 per pound on the New York Mercantile Exchange's Comex division. The ISM service sector survey, produced in Tempe, Arizona showed a further contraction in activity. Last month's reading of 47, which was showing a slower pace of contraction (a reading of 50 indicates neither expansion nor contraction) declined in July. And since the service sector comprises around 90% of the economy, the news isn't especially welcome.

Earlier in the week investment bankers, Goldman Sachs bumped up their economic growth rates for the remainder of the year. But as they did so they also warned that the government was likely to implement additional stimulus measures in 2010 and that their upgrade was mainly based on the inventory burn rate. In other words things had become so bad the snapback rally was understandably enormous. Usually a growth upgrade from a house such as Goldman is equated with a substantial rally for markets.

Since that didn't happen one can only conclude that something somewhere isn't ticking over properly.

Grains - Corn and soybean prices also reacted to that combination of dollar strength and weaker economic fundamentals at the margin. Lately much has been made of the splurge in Chinese bank loans apparently grossing $1 trillion or close to twice the amount of government stimulus at $585 billion last year. Investors now speculate that it's time to for banks to wind down some of that risk and raise lending standards and curb practices.

In that event it will be more difficult for grain processors to buy, hoard, store and import U.S. exports of bean products and corn. That combination sent prices scurrying downwards on Thursday.

November soybean futures got off lightly compared to corn and fell 15 cents to $10.30 per bushel. Meanwhile December corn fell 16.75 cents to $3.4025. A near 2% boost to the forecast from Brazilian growers owing to better rain conditions most likely also weighed on sentiment in the Chicago grain pits too.


FREE Subscription to Global Resources Alert - If you can tell us the closing price of December corn futures when the market closes NEXT Friday, August 13, 2009 - we'll enroll you at no cost into Global Resources Alert. All submissions must be sent before trading starts on Monday. If you are an existing subscriber, we'll send you a $25 check in the event you are the closest guess. FYI - Corn for December delivery is currently trading at $3.4025.

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Which Texas-based sugar manufacturer
is set to rally 32% before year end
if the commodities markets continue to reach for the sky?
Find out in the August issue of Global Resources Alert!!

The Supreme Council of the Secret Order of Jurojin