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In case you missed it – from the KFT EPS call

I’m posting a key slide from the KFT earning call. Nearly every key commodity that is important to KFT accelerated from April 2008 to July 2008. As a result the company is raising prices again in 3Q08.

Restaurant operators will be happy to see prices rising in the grocery channel.


Charting China: Is The Bottom In?

Chinese stocks tacked on another +1.3% last night, taking the A Shares Index to 3045. The July to date performance is +9.5%, comfortably outperforming US indices over the same duration.

Is the bottom in? I am not sure - bottoms are processes, not points, but the chart attached begs the question as we head into what is ostensibly a positive macro catalyst with the start of the Olympics in August.

For now, I am long China for a "Trade".

*Full Disclosure: I am long China via the FXI index.
KM
  • Shanghai Stock Exchange Composite Index
(chart courtesy of stockcharts.com)

Liquidity Watch: TED Spread Not Out Of Woods Yet...

Charts: 3 month Treasury Bill Yield Versus 3 month LIBOR Interbank Rate
  • Andrew Barber, Director
    Research Edge, LLC
TED Spread: 10 Year Cycle Chart
TED Spread: Last 2 years

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Run On The Fed?

The Fed’s discount window remains wide open, and last week we saw the highest borrowing by commercial banks since the week of May 28th. At $16.4 billion/day this appropriately reflects the strain within the US Financial system. Helicopter Ben is still in business, dishing out cheap money.

KM
Picture courtesy of Blue Wire @ http://www.bullnotbull.com/gallery/images/g-helicopter-big.jpg

The US Bank Failure Chart, Updated...

Chart - US Bank Failures, Total Assets: 1. Access to Capital continues to tighten, as Cost of Capital continues to heighten.
KM
Chart by Andrew Barber, Director, Research Edge, LLC

Could Cotton trade at over $1 a pound in 09?

According to comments made by Joseph Nicosia (CEO of Allenberg Cotton and American Cotton Shippers Association board member) during a conference call cited in the media on Friday, the combination of bad weather conditions hurting the harvest in India with a global production shift into more profitable food/energy crops has laid the groundwork for pricing that could reach levels in line with the record high of $1.15 in 1995.
  • At face, the math is simple—farmers in the US have been growing less cotton to concentrate on high-priced soy and corn while their counterparts in Brazil have also focused on soy as well as sugar cane. Poor weather in the subcontinent may reduce the harvest for India and Pakistan by as much as 10% -making for increased competition for a smaller US harvest.

    Naturally the primary driver and biggest puzzle in this equation is the world’s largest producer and importer of cotton, China; and specifically the remote Western autonomous region of Xinjiang, where a third of Chinese cotton is grown.

    It has been a tough year for cotton farmers in the Xinjiang. Skyrocketing rail transport costs and a rapidly tightening credit market saw inventory at east coast textile mills drop to levels as low as 15 days compared with 50 days or more at this time last year. In May, state media reported China Cotton Association estimates of 1 million tons of unsold cotton piled up in Xinjiang warehouses -by early July, that level had only reduced to 600,000. A rail subsidy announced two weeks ago by the NDRC should offset the total transport cost increase for wholesale dealers and finally get inventory flowing east again, although the exact implementation date is not clear.

    Adding insult to injury, this summer has been one of the driest in decades in the Chinese North West, with some reports placing the number of hectares in Xinjiang impacted by drought at 4 million.

    In sum, the harvest has been difficult and buyers scarce. With these mounting frustrations it’s no wonder that Wang Lequan, Party Secretariat of Xinjiang, has called for reduced dependence on cotton going forward by shifting some acreage into more lucrative livestock production.

    Although I am always skeptical of bullish predictions coming from an exporter, Mr. Nicosia appears to have compelling data points to help support his thesis. Reduced domestic production in China combined with external price pressure could lead to higher demand for US exports despite the slowing global economy over the next harvest cycle.

    Andrew Barber
    Director
    RESEARCH EDGE, LLC

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