Wednesday, May 18, 2011

Financial Repression Coming to America: PIMCO'S El-Erian

The co-CEO of the world’s largest bond fund has warned America that it faces a combination of higher inflation, austerity and financial repression over the coming years as policy makers grapple with the impact of the financial crisis and the subsequent policy response.

Mohammed el-Erian

“Think of the debt overhangs in advanced economies where projected rates of economic growth are not sufficient to avoid mounting debt and deficit problems,” said Mohamed A. El-Erian in speech at a PIMCO forum on growth.

“Some are already flashing red, and they will force even more difficult decisions between restructuring and the massive socialization of losses, like Greece,” he added.

“Others are flashing orange, like the US, and already require future sacrifices, most likely through a combination of higher inflation, austerity and, importantly, financial repression,” said El-Erian, who classifies financial repression as seeking to impose negative real rates of returns on savers.

This policy will undermine the real return contract offered to savers and, in El-Erian’s view, come instead of any bold moves to address structural problems and imbalances.

“Secular baseline portfolio positioning should minimize exposure to the negative impact of financial repression, hedge against higher inflation and currency depreciation and exploit the heightened differentiation in balance sheets and growth potentials,” El-Erian added.

Lindsey Williams Gas prices going to 6 or 7 dollars a gallon

Lindsey Williams - Radio Liberty 13-05-11 : they want to disrupt the flow of crude oil from every place in the middle east so that they can bring the gasoline prices to 6 or 7 dollars a gallon says Pastor Lindsey Williams , they are going to open four American oil feels after they cut of the supply in the middle east and oil prices reach $200 / $300

Pastor Lindsey Williams, who has been an ordained Baptist minister for 28 years, went to Alaska in 1971 as a missionary. The Transalaska oil pipeline began its construction phase in 1974, and because of Mr. Williams' love for his country and concern for the spiritual welfare of the "pipeliners,&quot ; he volunteered to serve as Chaplain on the pipeline, with the subsequent full support of the Alyeska Pipeline Company. Because of the executive status accorded to him as Chaplain, he was given access to information documented in his eye opening book, The Energy Non-Crisis.
After numerous public speaking engagements in the western states, certain government officials and concerned individuals urged Mr. Williams to put into print what he saw and heard, stating that they felt this information was vital to national security. Mr. Williams firmly believes that whoever controls energy controls the economy. Thus, The Energy Non-Crisis.

May 17th 2011 Market Recap with Silver

10 Stocks That Have Paid Dividends Since The 1800s: PPG, CL. KO, PG, UDI, ED, XOM, NST, SWK, WGL

Over the last several years many companies have chosen to not raise their dividend, while some decided to cut their dividend and some even decided to stop paying a dividend. In some cases their financials did not warrant the change. As investors in dividendgrowth stocks, we want to look for companies with a positivedividend culture.

Below are 10 companies that have a long-standing pro-dividend culture. They have paid an uninterrupted dividend since the 1800s - more than 100 years - and have increased their dividend for at least the last 10 years. They are presented here in ascending rank of how long they have paid a dividend, included also is the number of years of consecutive increases:

PPG Industries, Inc. (PPG) | Yield: 2.5%
Dividends since: 1899 | Increases: 38 years
PPG is a leading manufacturer of coatings and resins, flat and fiber glass, and industrial and specialty chemicals.

Colgate-Palmolive (CL) | Yield: 2.7%
Dividends since: 1895 | Increases: 48 years
Colgate-Palmolive Company (Colgate) is a major consumer products company thatmarkets oral, personal and household care, and pet nutrition products in more than 200 countries and territories.

Coca-Cola Company (KO) | Yield: 2.8%
Dividends since: 1893 | Increases: 49 years
The Coca-Cola Company is the world's largest soft drink company with a sizable fruit juice business.

Procter & Gamble (PG) | Yield: 3.2%
Dividends since: 1891 | Increases: 54 years
The Procter & Gamble Company is a leading consumer products company that marketshousehold and personal care products in more than 180 countries.

UGI Corporation (UGI) | Yield: 3.2%
Dividends since: 1885 | Increases: 24 years
UGI Corp. operates propane distribution, gas and electric utility, energy marketing and related businesses through subsidiaries.

Consolidated Edison, Inc. (ED) | Yield: 4.5%
Dividends since: 1885 | Increases: 37 years
Consolidated Edison, Inc. is an electric and gas utility holding company that serves parts of New York, New Jersey and Pennsylvania.

Exxon Mobil Corporation (XOM) | Yield: 2.3%
Dividends since: 1882 | Increases: 28 years
Exxon Mobil Corp. (XOM) formed through the merger of Exxon and Mobil in late 1999, is the world's largest publicly owned integrated oil company

NSTAR (NST) | Yield: 3.4%
Dividends since: 1879 | Increases: 13 years
NSTAR I a Boston-based holding company that serves some 1.4 million electric and natural gas customers in Massachusetts, has agreed to be acquired by Northeast Utilities.

Stanley Black & Decker Inc. (SWK) | Yield: 2.8%
Dividends since: 1877 | Increases: 44 years
Stanley Black & Decker Inc. is diversified global provider of hand tools, power tools and related accessories and systems resulted from the March 2010 merger of StanleyWorks and Black & Decker.

WGL Holdings Inc. (WGL) | Yield: 2.5%
Dividends since: 1852 | Increases: 35 years
WGL Holdings Inc. provides natural gas service in the Washington, DC, metropolitan area and surrounding regions, including Maryland and Virginia.

Searching for companies with a strong dividend culture is a great place to start, but before buying we must also consider other important factors such as: dividend fundamentals, ability to cover the dividend and fair value. Ultimately, we want to buy companies that can sustain a growing dividend.

The Corn Conundrum

In the days of olde, the prices of agricultural commodities were determined by the birds, the bees, and Mother Nature. No more.

The Mississippi River basin is suffering once in a century floods, thousands of acres of farmland have been destroyed, and those still in operation are far behind schedule in their spring plantings. Private analysts are predicting a substantial fall in yields this year. Drought in Texas means they may lose half their wheat crop. China has flipped from a net exporter of food to a large net importer for the first time in many years. So prices for corn, wheat, and soybeans should be absolutely going through the roof right now. Right?

Wrong. Take a look at the charts below for the grain ETF (JJG), the agricultural ETF (DBA), and the fund for corn (CORN), and it is clear that they all peaked at the end of April, right when oil, the euro, gold, silver, stocks, and other commodities began to sell off in earnest. The harsh reality is that food has become just another asset class to be flailed mercilessly by high frequency traders and momentum driven hedge funds. And with the world now in “RISK OFF” mode that means the ags go down with everything else, big time.

This is only a temporary state of affairs. The basic fact is that the world is still making people faster than the food to feed them. The long term fundamentals for food are in fact getting worse at an ever accelerating rate. Has anyone mentioned that the world is running out of fresh water with which to irrigate?

So once the hot money has had its way on the downside, they will reverse and pile back in on the long side. Bring an end to the “RISK OFF” trade, and the ags will be one of the first sectors that you will want to buy.




By. Mad Hedge Fund Trader

Jay Taylor: Turning Hard Times Into Good Times

Profiting from Fed Lies and Distortions

click here for audio Hour #1 Hour #2

The End of the Eurozone?

The Minimalist Guide To Financial Planning

Believe it or not, financial planning is so simple it's ludicrous...

Step 1: How To Build Wealth:

Spend less than you earn and invest the savings wisely.

Rinse and repeat until step 2...

Step 2: How To Have Enough To Retire:

Spend less than your investment income and invest the savings wisely.

That's it. Seriously!

You will enjoy massive financial success if you just run your life from start to finish according to these two sentences. You don't have to be a financial genius and you don't have to learn tons of technical mumbo jumbo. Anyone can do it.

It's so simple it's a joke... except for one minor, little detail...

Why So Few Succeed

The obvious question is, "If it is so simple to achieve financial security then how come almost nobody succeeds?"

I'm glad you asked.

There are actually many reasons. Here are some of the most common.

  1. Procrastination: Most people wait until tomorrow to start saving and building wealth. The problem is eventually there aren't enough tomorrows left to do the job.

  2. Lack Of Discipline: Thomas Huxley said it best, "Perhaps the most valuable result of all education is the ability to make yourself do the thing you have to do, when it ought to be done, whether you like it or not; it is the first lesson that ought to be learned; and however early a man's training begins, it is probably the last lesson that he learns thoroughly."

  3. Short-Term Perspective: The essence of spending less than you earn is delayed gratification. You must view your goals from a 20 or 30 year perspective so that saving isn't a sacrifice. Instead, it is remembering what you truly want (freedom and independence instead of more stuff) and acknowledging it daily with proper action.

  4. No Perspective: Some people simply don't connect their daily spending habits to long-term implications. Retirement is so far in the future it equates to Neverland. They live unconsciously and spend, spend, spend until there is more month than money. They're just not paying attention.

  5. Ignorance: They just don't know any better.

  6. Can't Invest Wisely: This is the only part of the equation that requires financial skill. It is not complex. There are simple solutions that work. However, this is the one excuse that legitimately takes fortunes down when everything else is done correctly.<
Two Things To Notice...

There are two things you should notice from the above list.

  1. All the obstacles except for the the last item on the list (investment skill) are caused by your own mental blocks. More importantly, you have the power to overcome these obstacles since they are inside you. In other words, anyone can build wealth if you just develop the essential personal skills. It is not rocket science.

  2. Even though building wealth is a financial goal notice how only one of the 6 causes listed above is financially related! I'm always amazed how achieving financial goals has very little to do with finance and everything to do with you.

As Steven Pressfield wisely wrote, "It may be that the human race is not ready for freedom. The air of liberty may be too rarified for us to breathe... The paradox seems to be, as Socrates demonstrated long ago, that the truly free individual is free only to the extent of his own self-mastery. While those who will not govern themselves are condemned to find masters to govern over them."

In other words, freedom is within you. You have the power to choose it (including financial freedom).

How The Financial Services Industry Has Failed

Most studies show 5% or less of working Americans retire with anything remotely close to financial security.

Applying the previous quote, it means 95% are governed by masters other than themselves.

The solution to the problem is simple. However, implementing the solution has proven elusive to the financial services industry because the cause has nothing to do with "financial" and everything to do with human nature.

The problem is you've got a financial services industry trained to sell investment products when the only service most people need is accountability, support and coaching to do the right thing.

The technical aspects of implementing a financial plan are beyond simple. Anyone who can fog a mirror can get adequate diversification at low cost using ETF's or mutual funds. You don't need an "expert" to do the job. The prescription for a conventional, diversified portfolio is well-documented and requires no serious expertise. You can learn everything necessary to implement the investment side of the wealth building equation in a few hours or less.

People are failing financially not because of financial reasons... they are failing for no other reason than simply because they aren't doing what they know needs to be done.

The Conundrum

Think about it...

People are turning to financial experts for financial guidance. They want help in resolving their financial challenges.

The experts are selling them investment products as the solution.

Unfortunately, investment products are the easiest part of the equation. Nobody needs an expert for that. What they need is an expert for the more complicated, personal stuff that is truly keeping them from building wealth.

In other words, they need help building wealth in the first place, but what they get is a group of financial experts who are only in the business of managing the wealth they already built.

If you don't believe this is true just try getting the attention of a high quality financial planner when you have nothing to invest.

The person with nothing to invest needs the most help; yet, the financial planning profession isn't designed to serve that person. They are in the business of selling investment products.

Do you see the confusion?

The primary obstacles to wealth are not financially caused. People seek expert guidance. The experts sell them financial solutions.

It's a mess. It doesn't work.

That's why I got in the money coaching business. People need personal solutions... not investment solutions.

As I said in the opening, the financial planning part is simple — spend less than you earn and invest the savings wisely. The problem isn't in knowing what to do. The problem is getting it done.

It is time people got the help they really needed.

Don’t Buy A House In 2011 Before You Read These 20 Wacky Statistics About The U.S. Real Estate Crisis

Unless you have been asleep or hiding under a rock for the past five years, you already know that we are experiencing the worst real estate crisis that the U.S. has ever seen. Home prices in the United States have fallen 33 percent from the peak of the housing bubble, which is more than they fell during the Great Depression. Those that decided to buy a house in 2005 or 2006 are really hurting right now. Just think about it. Could you imagine paying off a $400,000 mortgage on a home that is now only worth $250,000? Millions of Americans are now living through that kind of financial hell. Sadly, most analysts expect U.S. home prices to go down even further. Despite the "best efforts" of those running our economy, unemployment is still rampant. The number of middle class jobs continues to decline year after year, but it takes at least a middle class income to buy a decent home. In addition, financial institutions have really tightened up lending standards and have made it much more difficult to get home loans. Back during the wild days of the housing bubble, the family cat could get a zero-down mortgage, but today the pendulum has swung very far in the other direction and now it is really, really tough to get a home loan. Meanwhile, the number of foreclosures and distressed properties continues to soar. So with a ton of homes on the market and not a lot of buyers the power is firmly in the hands of those looking to buy a house.

So will home prices continue to go down? Possibly. But they won't go down forever. At some point the inflation that is already affecting many other segments of the economy will affect home prices as well. That doesn't mean that it will be middle class American families that will be buying up all the homes. An increasing percentage of homes are being purchased by investors or by foreigners. There are a lot of really beautiful homes in the United States, and wealthy people from all over the globe love to buy a house in America.

But because of the factors mentioned above, it is quite possible that U.S. home prices could go down another 10 or 20 percent, especially if the economy gets worse.

So what is the right time to buy a house?

Nobody really knows for sure.

Mortgage rates are near record lows right now and there are some great deals to be had in many areas of the country. But that does not mean that you won't be able to get the same home for even less 6 months or a year from now.

In any event, this truly has been a really trying time for the U.S. housing market. Hordes of builders, construction workers, contractors, real estate agents and mortgage professionals have been put out of work by this downturn. The housing industry is one of the core pillars of the economy, and so a recovery in home sales is desperately needed.

The following are 20 really wacky statistics about the U.S. real estate crisis....

#1 According to Zillow, 28.4 percent of all single-family homes with a mortgage in the United States are now underwater.

#2 Zillow has also announced that the average price of a home in the U.S. is about 8 percent lower than it was a year ago and that it continues to fall about 1 percent a month.

#3 U.S. home prices have now fallen a whopping 33% from where they were at during the peak of the housing bubble.

#4 During the first quarter of 2011, home values declined at the fastest ratesince late 2008.

#5 According to Zillow, more than 55 percent of all single-family homes with a mortgage in Atlanta have negative equity and more than 68 percent of all single-family homes with a mortgage in Phoenix have negative equity.

#6 U.S. home values have fallen an astounding 6.3 trillion dollars since the housing crisis first began.

#7 In February, U.S. housing starts experienced their largest decline in 27 years.

#8 New home sales in the United States are now down 80% from the peak in July 2005.

#9 Historically, the percentage of residential mortgages in foreclosure in the United States has tended to hover between 1 and 1.5 percent. Today, it is up around 4.5 percent.

#10 According to RealtyTrac, foreclosure filings in the United States are projected to increase by another 20 percent in 2011.

#11 It is estimated that 25% of all mortgages in Miami-Dade County are "in serious distress and headed for either foreclosure or short sale".

#12 Two years ago, the average U.S. homeowner that was being foreclosed upon had not made a mortgage payment in 11 months. Today, the average U.S. homeowner that is being foreclosed upon has not made a mortgage payment in 17 months.

#13 Sales of foreclosed homes now represent an all-time record 23.7% of the market.

#14 4.5 million home loans are now either in some stage of foreclosure or are at least 90 days delinquent.

#15 According to the Mortgage Bankers Association, at least 8 million Americans are currently at least one month behind on their mortgage payments.

#16 In September 2008, 33 percent of Americans knew someone who had been foreclosed upon or who was facing the threat of foreclosure. Today that number has risen to 48 percent.

#17 During the first quarter of 2011, less new homes were sold in the U.S. than in any three month period ever recorded.

#18 According to a recent census report, 13% of all homes in the United Statesare currently sitting empty.

#19 In 1996, 89 percent of Americans believed that it was better to own a home than to rent one. Today that number has fallen to 63 percent.

#20 According to Zillow, the United States has been in a "housing recession" for57 straight months without an end in sight.

So should we be confident that the folks in charge are doing everything that they can to turn all of this around?

Sadly, the truth is that our "authorities" really do not know what they are doing. The following is what Fed Chairman Ben Bernanke had to say about the housing market back in 2006....

"Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise."

Since that time U.S. housing prices have experienced their biggest decline ever.

At some point widespread inflation is going to reverse the trend we are experiencing right now, but that doesn't mean that most American families will be able to afford to buy homes when that happens.

As I have written about previously, the middle class in America is shrinking. The number of Americans on food stamps has increased by 18 million over the past four years and today 47 million Americans (a new all-time record) are living in poverty.

Millions of our jobs are being shipped overseas, the cost of living keeps going up and an increasing percentage of American families are losing faith in the economy.

More Americans than ever are talking about "the coming economic collapse" as if it is a foregone conclusion. Our federal government is swamped with debt, our state and local governments are swamped with debt and our economic infrastructure is being ripped to shreds by globalization.

So sadly, no, there are not a whole lot of reasons to be optimistic at this point about a major economic turnaround.

The U.S. economy is going down the toilet and the coming collapse is going to be incredibly painful for all of us.

Hopefully when that collapse comes you will have somewhere warm and safe to call home. If not, hopefully someone will have compassion on you. In any event, we all need to buckle up because it is going to be a wild ride.

Be ready for rebound in platinum – BUY!

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The platinum price took a heavy beating when the Great Tohoku Earthquake struck Japan on March 11 and seemed to recover afterwards before retreating recently.

Sources: I-Net Bridge; Plexus Asset Management.

The recovery and subsequent recent decline was more a reflection of cross-rate movements of the US dollar than anything else as the platinum price in terms of euro has remained in a very narrow range since the end of March.

Sources: I-Net Bridge; Plexus Asset Management.

The weakness of the platinum price is more apparent if it is compared to gold. Since Japan’s twin disasters, platinum’s premium to gold has been in a downtrend, falling from $366 to $270 or by 26.2% at Friday’s close.

Sources: I-Net Bridge; Plexus Asset Management.

In terms of euro the premium fell to 191 from 234 or 18.4%.

Sources: I-Net Bridge; Plexus Asset Management.

But why the massive hit on platinum?

The Japanese auto industry was hit particularly hard by the earthquake and tsunami that followed. Japan’s production of cars and trucks fell by 535,000 units or 57.3% in March compared to March last year. Toyota was scheduled to resume production in the second half of April, but only to 50% of normal production. If I assume that only 50% of cars and trucks were produced in April compared to last year, this will mean a loss of another 313,000 vehicles. If production in May returns to 75% of the same month last year, another 180,000 vehicles would have been lost compared to last year’s total production of 9.5 million cars and trucks. Those production losses add up to a staggering 1,028 million vehicles or nearly 11% of 2010 production! The impact of the Kobe disaster in January 1995 was miniscule compared to that of the twin disaster in March. I estimate that the production of only approximately 40,000 units were lost in January that year while production returned to normal in February.

Japan consumed a gross 535,000 ounces of platinum for auto-catalysts in 2010. It therefore means that Japan’s auto industry uses on average 0.054 ounces of platinum per vehicle. It therefore transpires that since March platinum demand from the Japanese auto industry alone has dropped by approximately 58,000 ounces. That excludes the ripple effect of supply disruptions in other countries such as Malaysia that saw auto production in that country slipping by 24.7% in April. I will not be surprised if the loss of the total demand for platinum in the global auto industry this year could add up to in excess of 100,000 ounces or 1.7% of last year’s total supply. While it seems small, the 100,000 ounces should be compared to the average investment demand of approximately 55,000 ounces (2008–2010). That is huge!

The big question is when the platinum price will start to recover. I think it is generally accepted that this time the damage to Japan’s economy and infrastructure is significantly worse than after the Kobe disaster. The main difference between now and then is that the yen has not been allowed to weaken against the US dollar to the same extent as in 1995 when Japan’s exports to the US were seriously hampered.

Sources: I-Net Bridge; Plexus Asset Management.

Immediately after the twin disaster Japan’s export markets were also supported by the weakening of the yen against the euro.

Sources: I-Net Bridge; Plexus Asset Management.

I think it is only a question of time before platinum’s premium to gold will be restored. In 1995 it took approximately 53 working days after the disaster before the premium started to open up. We are now on the 45th day!

Sources: I-Net Bridge; Plexus Asset Management.

In 1995 we saw a jump of more than 10% in the platinum price when the market realized the underlying value of the metal compared to other precious metals. Will we see it again? Well, take a look at what the professionals are saying!

Sources: CFTC; Plexus Asset Management.

Where the net long futures position of non-commercial traders on NYMEX tumbled in the week of the twin disaster, net positions have increased by 8,489 contracts or 424,450 ounces from a low of 18,503 contracts in the second half of March and are currently approaching the pre-disaster levels.

I am adding platinum to my portfolio!

Wheat Damage Claims on Dry Weather May Signal Worse Harvest Than Forecast

Wheat crops in the U.S. Great Plains are showing signs that production may plunge more than the government forecast last week as hot weather and a lack of rain erode plant quality and force farmers to harvest early.

As of May 15, U.S. winter-wheat was in the worst condition since 1996, with 44 percent of fields rated poor or very poor by the government. The National Weather Service estimates rainfall in the past two months was less than half of normal in much of Texas, Oklahoma and Kansas, where insurance adjuster David Reed said he’s had 300 farmer claims for drought damage in his area this season, already 10 times more than last year.

“I went out to look at fields, and it looked like the tips of the heads were burnt” after temperatures last week topped 100 degrees Fahrenheit (38 degrees Celsius), said Reed, an area claims supervisor in Stockton, Kansas, for Rural Community Insurance Services, a unit of Wells Fargo & Co. “It’s kind of scary. I would think that the abandonment numbers probably are going to be fairly high.”

After a Russian drought led to a drop in global output in 2010, the prospect of smaller crops in the U.S., the world’s largest exporter, has sent wheat futures up 63 percent in the past year. Goldman Sachs Group Inc. on May 11 raised its price forecast, citing “persistent adverse weather” in many growing areas. Dry spells in Europe and excessive rain in the northern U.S. and Canada also fueled prices, boosting costs for food makers including General Mills Inc. (GIS)and Panera Bread Co.

Declining Output

The U.S. Department of Agriculture forecast on May 11 that hard, red winter-wheat output will drop 25 percent to 762 million bushels, the smallest since 2006. Mark McMinimy, a Washington-based agribusiness analyst with MF Global Holdings Ltd., said the USDA will likely cut that estimate by 4.9 percent to 725 million because of the dry spell. Hard, red winter wheat, the most common U.S. variety, is grown primarily in the Plains and is used to make bread.

Further downgrades to Great Plains supplies would be “supportive” to futures, especially if planting delays are prolonged in North Dakota and Canada, McMinimy said. Wheat futures for July delivery jumped 3.7 percent today to close at $7.64 a bushel on the Chicago Board of Trade. Prices reached a two-year high of $9.1675 on Feb. 14.

‘Too Late’

“It’s getting to the point where, across a large section of the wheat belt, it’s too late for rain to do any good,” McMinimy said. “Crop conditions continue to decline. I don’t think it would be too surprising to see production figures decline again.”

Last week, Goldman Sachs raised its three-month wheat forecast to $8 from $7.75, while the six-month and 12-month forecasts were increased to $8.35 from $7.50.

Dry weather already is forcing farmers to harvest two weeks ahead of normal in Texas and Oklahoma, according to Stillwater, Oklahoma-based wheat marketer Plains Grains Inc.

Kansas, Texas and Oklahoma produced 608.4 million bushels of wheat last year, or 28 percent of the total U.S. supply, according to the USDA. Those states are the biggest growers of the hard, red winter variety. This year, the USDA expects production to drop 63 percent in Texas, 38 percent in Oklahoma and 27 percent in Kansas, compared with 2010.

About 8 percent of crops in Texas had been collected as of May 13, and harvest began last week in Oklahoma, said Mark Hodges, the executive director of Plains Grains, a nonprofit group that takes wheat samples from elevators to determine the quality of the U.S. crop.

‘Severe Stress’

The early harvest “is a very strong indicator that the crop was under severe stress,” Hodges said. “Since we’re two weeks ahead of normal, that tells you immediately that we’re going to have less-than-average yields.”

Kansas, the biggest winter-wheat grower, may produce 261.8 million bushels this year, the least since 1996, the USDA said. The Wheat Quality Council, a Pierre, South Dakota-based trade group, estimated Kansas production at 256.7 million, based on a survey of 55 analysts following a three-day tour of fields.

The USDA’s “wheat report is pretty backward looking at this point,” said Mike Zuzolo, the president of Global Commodity Analytics & Consulting in Lafayette, Indiana. “The USDA is going to have to square up some issues with the European wheat crop and the U.S. wheat crop. It doesn’t seem like, to me, that they factored in enough supply reductions.”

T-Storm Outlook

About 52 percent of the hard, red winter-wheat growing area from South Dakota to Texas received less than half of the normal amount of rainfall in the past 30 days, said Mike Tannura, the president of T-Storm Weather in Chicago. Areas of Nebraska and Kansas may get up to 1.5 inches (3.8 centimeters) of rain from storms beginning May 19, while southwest Kansas, Texas and Oklahoma will be “mostly dry over the next week,” he said.

“You can begin harvesting wheat at the end of May in the southern Plains, so even if you get an inch of rain now, it’s way too late,” Tannura said. “They needed it weeks or months ago.”

The USDA estimates that U.S. wheat exports in the year ended May 31 will be 45 percent higher than a year earlier. If reduced grain supplies send prices higher, demand from food processors and livestock feeders will likely slow, said Diana Klemme, a director at Grain Service Corp., a consulting company and brokerage in Atlanta.

“For hard wheat, we will not be able to have the same pace of consumption we had this year, because we would have zero left,” Klemme said. “Wheat feeding will have to dial back, because the wheat just isn’t there.”