Gold’s oil-buying power is at its lowest in three years. (The chart shows the price of oil rising relative to the price of gold.) Hedge funds and other traders who play the gold/oil spread could be taking profits. Otherwise, this is hard to explain, since gold is considered a leading indicator of inflation.

In the past two weeks, crude oil prices rose to a record near $120 a barrel, while the spot price of gold fell from around $950 to $870 an ounce. Today an ounce of gold buys 7.65 barrels of oil. When gold was near $1,000 an ounce earlier this year, an ounce bought more than 10 barrels of oil. Gold’s weakest point relative to oil was in 2005 around 6 barrels.

Is the underperformance signalling that inflation expectations are overblown? Perhaps the Fed knows something … it cut a key interest rate another quarter percentage point on Wednesday and said it expected inflation to moderate in coming quarters, as energy and commodity prices level out. “I am still not getting why gold is trading down here and crude is up there. So something’s gotta give,” said Jonathan Jossen, an independent floor trader on the COMEX gold floor.

It is a tsunami — a wave of food inflation moving across the world. With it has come a tsunami of news stories on the subject as if the shortage of food is a surprise.A rising population, a larger middle class in Asia demanding a better diet, and a biofuel craze that uses food for fuel all pointed to higher prices for easily the past 18 months.

 ”Everywhere you see, there is some story about food shortages and hoarding and tightness of supplies,” said Neauman Coleman, an analyst and rice broker in Brinkley, Arkansas.

Fears about tight world supplies of food led governments to hoard and ignited protests in places like Haiti. But food scares have even erupted in some unlikely places, including the United States, the world’s largest producer and exporter of food.

Sam’s Club, a unit of retail giant Wal-Mart, said on Wednesday it was capping sales of bulk bags of rice at four bags per customer per visit. The previous day, rival Costco Wholesale Corp said it had seen increased demand for items such as rice and flour as worried customers stocked up.

You know it’s gone over the top when movie stars and government officials, like Drew Barrymore or the new Secretary of Agriculture Ed Schafer, make appearances on the Chicago Board of Trade floor, the world’s benchmark for price discovery, trumpeting their food causes.

We live in interesting times. The days of cheap food seem to be over.

THE WEEK AHEAD

The tidal wave of price volatility will continue, analysts say.

U.S. traders are most concerned about the delay in planting corn, running about two to three weeks behind. Farmers are getting antsy as they watch another around of rains and snow move across the upper Midwest this weekend — keeping them sidelined a little longer. One forecaster is calling for snow on Sunday night in Chicago.

Farmers hope to their get corn planted by May 15. After that point, yields start to drop off 1.5 bushels per acre per day everyday the crop goes unplanted. Granted farmers can catch up quickly given the size of today’s planting equipment, but they still need a break in the weather.

Bottomline…the latest weather forecast will impact CBOT prices as much as anything else in the week ahead.

USDA will issue its weekly crop progress report on Monday afternoon. Chicago grain traders expect USDA to report corn planting 16-18 percent complete, versus the five-year average of 31 percent by late April.

All the rain is also causing the Mississippi River, the main artery for transporting grain to export terminals at the U.S. Gulf, to flood.

For soybeans, the lack of a resolution between Argentine farmers and the government over a soy export tax will underpin nearby prices. Farmers are threatening a second strike, blocking soy transportation to processing plants and export terminals, after a 30-day truce that ends May 2. Argentina is the world’s top soymeal and soyoil exporter and third-largest in soybeans.

Insiders will be watching to see if any May options were exercised over the weekend following expiration on Friday. In particular, local traders were eyeing the $5.80 strike in corn, $8 in wheat and $23.80 in rice. If traders were assigned positions over the weekend, it could add to volatility — offsetting them in futures trade on Sunday night or Monday morning.

Outside market factors like the value of the dollar, the U.S. credit crunch, the price of gold and crude oil will continue to be big contributors to price direction for Chicago Board of Trade commodities this spring. But fundamental inputs — export demand, shrinking grain supplies, weather — are getting more play — with the biggest influence being weather in the United States, the world’s largest food producer and exporter. 

    We saw what happened to CBOT rice prices last week when fears about tight world rice supplies led governments to hoard and ignited food riots in places like Haiti.  CBOT rice made a series of all-time highs, four straight days during the week ended April 18, climbing to over $24 a hundredweight by Friday. That was more than double its value a year ago.  

 STAY TUNE TO WEATHER FORECASTS

Daily weather forecasts and intraday updates will be key to price direction. Grain traders are growing increasingly worried about planting delays as the U.S. Midwest doesn’t seem to be able to shake out of a cool, wet pattern. 

    Corn seeding is already behind and if farmers can’t get their corn seeded by mid-May, yields can drop drastically — 1.5 bushels per acre per day for every day fields are not planted by May 15, crop specialists say. 

    Planting delay jitters helped Chicago corn prices rise to all-time highs this week, with nearly all contracts well above $6 a bushel — triple historical prices. 

    Southern farmers are also having problems planting rice in Arkansas, the top U.S. rice state. 

    So all eyes will be on the USDA weekly crop progress report to be issued Monday afternoon which will give the latest planting update. 

Other factors to watch: 

Any developments regarding talks between Argentine farmers and the government over a soy export tax. CBOT traders are awaiting for some resolution. The lack of any agreement underpins soy prices. Exports out of Argentina, the world’s top soymeal and soyoil exporter and No. 3 soybean exporter, are slowed after a three-week farmer protest over the export tax. The strike was called off for 30 days to give farmers and the government time to work out a resolution. 

Option expiration of May contracts is Friday. Given the huge amount of volume traded via CBOT options, big open interest in any strike near the May futures price level will influence price direction in the coming week. Prices tend to be attracted to the levels with big open interest.

U.S. Census Bureau will issue its monthly April crush data on Thursday. 

Commodity Futures Trading Commission meeting with U.S. grain leaders. Last but not least will be the aftermath of the CFTC meeting with the U.S. grain industry in Washington DC on Tuesday to iron out concerns about the hedging viability of CBOT agricultural contracts. 

    There promises to be lots of fireworks given the non-convergence issues (cash and futures prices not coming together at delivery locations at contract expiration) surrounding Chicago contracts. Also on the table will be the dominance of commodity funds in CBOT ag futures given the expansion of speculative position limits and more likely ahead. Insiders are doubtful of any resolutions between the grain industry and the industry’s regulator.

The lobby of the Hotel Hyatt in Santiago is abuzz. Look at the bar area, poolside, or anywhere where else and you’ll see people deep in conversation, in pairs, threes or fours. Take another snapshot a half hour later and the same spaces will be occupied by different faces.If it weren’t for the relative lack of women, you’d think this was speed-dating - quick meetings and quick decisions about whether or not to continue with a relationship.

In fact, these are high-powered executives from some of the world’s largest copper companies, producers, buyers and sellers, and they are in Chile to do business.

“I can tell you that I plan to meet with all of my clients this week, from Antofagasta, from Codelco, from Billiton, whoever makes copper,” said one chief executive in Santiago for the annual CRU/Cesco copper week.

One of the unexpected findings from executives and analysts attending the CESCO and CRU copper conferences in Santiago, Chile: Women are better drivers than men in those house-sized trucks roaming surface mines around the world. They’re said to be more cautious and that reduces wear and tear on the 13 feet-high tires they rumble around on.

Watch this video uploaded to YouTube to see the monster-of-monster trucks in action.

The largest of these trucks, manufactured by Caterpillar, Komatsu of Japan and Germany’s Liebherr, can carry almost 350 tonnes. Each tire can cost up to $125,000 but they can easily be flattened by a fist-sized stone wedged in its treads.

To avoid blowing a tire, a mine might reduce the bucket load even when operating full-out to keep up with global copper demand. Light trucks will speed ahead of the big ones and radio in debris on the mine roadbed. “You get guys jumping out of vehicles throwing stones off the road,” one analyst told me.

More women are getting hired anyway and not just to drive trucks. With the copper industry booming, both tires and workers are in short supply. Copper prices are near records but so are operating costs.

Yet even in Australia, with its macho image, at one large mine, reportedly the truck drivers are 60 percent female and 40 percent male.  In the superstitious old days they said women were back luck at a mine. Today, it seems they’re a charm.

Speeding from the airport to the Grand Hyatt Hotel in Santiago, you get the impression that tunnelling comes naturally in Chile. It should. The country is the kingdom of copper and home to many of the world’s largest mines. There’s Escondida (right), an enormous open-pit mine that can be seen from space. At El Teniente (pictured below left in a company Web site photo), thousands of mineworkers commute every day several kilometres deep under the Andes.Hundreds of copper industry executives landed here this week for the annual CESCO and CRU copper conferences. With copper prices near record highs, Chile is rolling in money from its mines, which produce about a third of the world’s copper. The wealth isn’t showy in conservative Chile. But you see it everywhere. Santiago is clean and orderly (and spectacularly located at the foot of the Andes.) You feel safe jogging or strolling in its many parks. There is little overt poverty, unlike elsewhere in South America.

The trip downtown from the airport now takes about 25 minutes. Four years ago, before the sleek Costanera Norte freeway tunnel opened, travelers had to endure a bumpy, meandering hour-long cab ride through endless neighbourhoods. The city is sprouting new highways like Nororiente to its suburbs. Americans can feel at home, a shopping mall boasting the highest tower in Latin America, Costanera Center, is going up in the heart of Santiago’s new financial district - locals call it “Sanhattan.”

   It’s an old saying on LaSalle Street that “rain makes grain.” But too much of a good thing this spring could end up to be a real drag on U.S. crop yields if Midwest farmers can’t get their corn planted by the middle of May.

    That was the worry among CBOT grain traders late this week as the heart of the U.S. Corn Belt can’t seem to break into spring.

    By far the wettest areas of the belt were the southern Midwest and Mississippi Delta, where farmers would typically be planting corn this week. Heavy spring rains, causing rivers to swell and fields to flood, has kept farmers sidelined.

    Much of the northern Midwest, including northern Indiana, Illinois and Iowa, was also soggy. But planting typically doesn’t get started there for a few more weeks.

    The planting delays boosted corn prices most of the week. But some extended forecasts for the 11- to 16-day period looked a little drier on Friday, feeding end-week profit-taking in corn.

    New-crop December corn <CZ8> closed down 1-1/2 cents at $6.08-3/4 per bushel after notching a contract high of $6.12 on Thursday. The spot month <CK8> traded above $6 a bushel for the first time ever on Thursday, buoyed not just by the planting weather but by Monday’s sharp cut in the government’s projected U.S. corn acreage in 2008.

    “Already there’s some second guessing about next week’s weather,” said Joe Victor, an analyst with Allendale Inc, a farm advisory firm in Illinois.

    Some weather forecasters on Friday were calling for three waves of rains next week. Updated models called “for the heaviest wave next week may be going a little south and away from the major Midwest,” Victor said.

    Along with weather forecasts, traders will tune into USDA’s first weekly crop progress report to be issued on Monday afternoon. The general feeling among traders and crop specialists is the U.S. corn seeding is several weeks behind schedule in the southern production belt.

    While there’s still plenty of time to plant both corn and soybeans, U.S. farmers have hoped to get a jump start this spring so crops maximize yield potential given the strong global demand for grains and oilseeds.

    Corn yields, for example, can typically drop 1 to 1.5 bushels per acre per day in Illinois and Iowa for every day that fields are planted after mid-May.

    “From our vantage point, we’re two to three weeks behind schedule. Those delays will likely move northward into mid-May to early June,” Greg Soulje, chief meteorologist with This Week in Agribusiness & Brownfield Network said this week at an agricultural conference in Chicago.

 Photo: Northern Illinois the last week in April. Photo by Christine Stebbins

A basket of stocks meant to send the first smoke signals of broader recovery is on a tear. Will the broader market follow?

The Merrill Lynch early cycle index, made up of auto makers, home builders, retailers and building materials companies, is up 6.8 percent this week and 7.25 percent so far this year. To compare, the benchmark S&P 500 is off 6.5 percent in 2008. (All of the XE components are in the S&P 500). Within the XE, there have have been big comebacks in home builders - Pulte Homes