Oil prices have been trading in an unusually strong positive correlation with equities markets over the past few months on hopes that signs of an economic recovery could mean a boost for energy demand.

But with oil and product inventories swelling and little sign of demand improving in the United States and other big developed economies, analysts warn that the linkage may be hard to maintain, especially if U.S. motorists cut back on vacations this summer.

We knew there was a lot of nuclear waste on Lehman's balance sheet. But we didn't know that was literally true:

Lehman Brothers Holdings Inc. is sitting on enough uranium cake to make a nuclear bomb as it waits for prices of the commodity to rebound, according to traders and nuclear experts.

At least uranium can in theory be used as a force for good, in nuclear power stations. Which is more than can be said for CDO-squareds.

(Via Wiesenthal)

Costs for ingredients like rice, wheat and oil are falling, so why are prices for breakfast cereals like Rice Krispies and Special K still rising?

If you want an answer to this question, you aren't the only one.

Food companies like Kellogg Co, which makes the products mentioned above, say the higher prices are justified because while commodity price inflation has eased amid a global economic downturn, commodity prices remain well above historical averages.

But CEOs of grocery chains like Safeway and Kroger say those higher prices are increasingly out of whack with their own lower-priced private label products.

"We have seen some price declines," Kroger Chief Executive David Dillon said on a conference call, but he said prices for national brands were not in step with a broader fall in commodity costs.

Dillon said sales of national brands were ho-hum, while sales of Kroger's store brands are rising enough to hit historic highs.

"That's going to continue as long as that kind of price differential exists," said Dillon, who expects national brand sellers to discount via promotions before they cut prices.

Dillon said there is no tug-of-war between grocers and food makers over pricing, but then again, he thinks his company will benefit either way. If national brands keep prices high, consumers buy more store-brand products, which produce higher profits. If national brands lower their prices, the grocer's overall sales could rise because it would be selling more expensive products.

"We are quite happy in either scenario," Dillon said.

While store brands result in lower total sales, grocers love them because they generate more profit. At the same time, they are favored by shoppers because they help them lower food costs during a severe recession.

Indeed, private label has become so popular that Safeway is rolling out its own line of seafood and prepared entrees called Waterfront Bistro.

(Picture: Reuters)

In a sign of the concern of a global slowdown, the DJ Iron & Steel Index has shed 15.6 percent in the past week. It is the worst-performing of the stock sector indexes tracked by DJ. (See the DJ sector indexes here). The coal stocks index is the second, followed by Industrial Metals & Mining. In fact, of the ten worst performing, only two are directly financial sector indexes and the rest are directly related to commodities, basic materials and transportation.

In the futures market, U.S. November crude settled down $10.52 to $96.37 a barrel, after touching a session low of $95.04 after lawmakers rejected the bailout package.

“This decision is a shock to the system,” said Sarah Emerson, director of Energy Security Analysis Inc. “The oil market is reacting strongly in part because of the implications of a weak economy on demand.”

    Top officials from the world’s largest fertilizer maker were in London this week trying to convince investors their stock has been unjustly thumped.
    Potash Corp of Saskatchewan shares at the Toronto Stock Exchange have lost 30 percent of their value since a mid-June peak, even though prices for potash fertilizer continued their meteoric rise.
    “Not that I’m whining about it, but we do have the lowest multiples we’ve ever had. Ever. And I’m not sure it reflects the true value of the company,” said Wayne Brownlee, the chief financial officer of Potash Corp, which plans to boost its potash capacity by 80 percent to capture higher prices.
    Hedge funds fled commodities and unwound Potash Corp positions since June, Chief Executive Bill Doyle said.
    Doyle continued to hold fast to his rosy outlook, noting producers are short on potash and prices should continue to rise this year, although not at the same rate as last year, when they tripled.
    Grain prices should remain historically high, Doyle said, leaving farmers flush and able to pay more for fertilizer.
    “Farmers will grouse that their costs are up. They are up, about $39 billion, but their receipts are up $50 billion. So the math works,” Doyle said.
    And despite recent events rocking the world’s financial capitals, demand for grain will continue to grow, keeping pressure on supplies, Doyle said, unless the world economy slips into a depression.
    “A lot of the people (in developing economies) who have this aspiration to eat better, I guarantee you, wouldn’t know what had happened to the investment banking community in New York,” he said. “It’s not high on their priority list, where food is.”

Photo: REUTERS/David Stobbe    Potash is piled into a large storage facility which is then loaded into a train car and transported in Saskatoon, Saskatchewan in this December 2006 file photo.

     More than 70 crop scouts began making their way home from Austin, Minnesota, on Friday after a week of 10-hour-long workdays counting and measuring corn and soybean yield potential through seven top production states around the U.S. Midwest.
    Based on the week’s findings in 2,100 fields and other data, tour leaders Pro Farmer newsletter released their 2008 corn and soybean production forecast early on Friday.
    They projected U.S. corn production at 12.152 billion bushels with the average yield at 153.3 bushels per acre. Soybean production was pegged at 2.930 billion bushels with an average yield of 39.95 bushels per acre.
    The corn estimate was below the U.S. Agriculture Department’s latest projection for 12.288 billion bushels and the soy production was under USDA’s 2.973 billion bushels forecast. USDA estimated the average corn yield at 155 bushels per acre and the soy yield at 40.5 bushels per acre as of August 1.
    But much has changed in the Midwest over the past three weeks. What some referred to as near-ideal crop weather earlier in the growing season was no longer the case.
    As the Pro Farmer Midwest Crop Tour’s two legs departed on Monday from Columbus, Ohio, and and Sioux Falls, South Dakota, crop scouts were already aware that variability and crop immaturity would be a big part of the story of this year’s corn and soybean crops. Scouts on the eastern leg quickly realized that dryness would be another major theme after finding gaping cracks in concrete-hard soils in most Ohio fields. The word was passed on to western scouts who were touring a surprisingly robust South Dakota corn crop and some of them remained sceptical until they saw for themselves as their routes moved east.
    Crop scouts will always welcome cool, dry weather during the crop tour, but it was difficult not to feel compassion for farmers that had not received any rain at all since July. Meanwhile, crop development in some fields was as much three weeks behind the normal pace, setting the stage for some nail-biting in the weeks ahead of the average first frost dates, which range from late September to mid-October depending on location.
    Tour organisers, farmers, and agronomists repeatedly stressed at evening meetings that most fields need rain immediately or else the yield estimates pulled from fields this week would begin eroding.
    Signs of a soggy start to the growing season were all there too, from washed out plots and replanted acres to swathes of pale green leaves on corn plants, a sign shallow root systems and nitrogen loss. Tops of fields that would normally look flat and uniform were discoloured and filled with potholes. Soybeans were planted in washed out patches of corn fields in wavy rows.
    All eyes now turn to the weather map. Soybeans need moisture to finish setting and filling pods. Corn needs just enough rain in the near term to add weight to undersized kernels, but not too much rain as that could slow down the crop’s already delayed development. And both crops will be racing for a photo finish in some areas, trying to get to the grain bin ahead of the first frost.

Farmers around the U.S. Midwest hope that this year’s growing season will stretch out a few days longer than usual into the fall to make up for the slow start to the growing season. Corn and soybean crops around the U.S. Midwest are depending on a warm and rainy finish to the growing season to reach the full potential predicted by crop scouts on the Pro Farmer Midwest Tour.

To try and forecast the date of the critical first frost, which could devastate thousands of acres of crops that were planted late due to cold and wet conditions in the spring, farmers are looking to the sky. Or to be more specific, they are looking at the moon.

Farmers, most of whom employ technology such as GPS systems on their harvesters and utilize seeds that were genetically modified to grow insect and disease resistant crops, are depending on old wives tales and consulting their almanacs to forecast when freezing temperatures would arrive in their areas.

The discussion by farmers about the importance getting past the full moon in mid-September was paramount at many dinners during the Pro Farmer Midwest crop tour. Some farmers think that if the frost, which could inflict harsh damage on crops that were developing behind schedule due to planting delays in the spring, does not hit during the mid-September full moon, the crops will be safe until the next full moon arrives.

Other farmers in areas such as Nebraska were checking out signs such as the call of the locust and evening fog that they believe tip off the date of the first frost.

The bottom line is that there is no failsafe method to forecast the date of the first frost. But that does not stop farmers from trying.

Crop scouts were busy in western Iowa on Wednesday trying to unlock the secrets of the upcoming soybean and corn harvest but they were ignoring another popular crop – wind.

Windmills are becoming increasingly common around the Corn Belt due to environmental concerns about traditional sources of power generation.

The wind harvest was taking up an unprecedented amount of acres this year in an area that some veteran scouts were referring to as this year’s garden spot of the Midwest in terms of potential corn and soybean yields.

In southern Minnesota, some growers were mulling offers from a wind farm company that had plans to erect windmills in that area. Some growers were being offered up to $5,000 a year to allow a windmill to be placed on their property, according to a farmer from that area who was taking part on the tour.

But the windmills can cause some problems, a farmer in west central Iowa told crop scouts. Dozens of windmills could be seen turning as the farmer told of some issues that might make farmers hesitate before collecting what appears to be easy money by renting out their acres to wind farms.

Maintenance workers need access to the windmills, so that can mean ploughing under more acres so a path can be built from the road to the windmill. Additionally, farmers have a harder time steering their machinery through fields if windmills sit right in the middle of prime crop producing territory. This can be particularly troublesome during years when poor conditions leave famers with only a short period of time to plant or harvest crops.

But still, the promise of cashing in on the green movement has a strong appeal to farmers, who like the promise of a steady annual payment.

The western Iowa scouts drove past a plant where windmill parts were waiting to be assembled in area fields. There were piles and piles of blades on the ground, suggesting that many area farmers were eager to take advantage of this new cash crop.

    Crop scouts touring corn and soybean fields around the eastern Midwest this week have seen more than their fair share of the bizarre thanks to an abundance of moisture at planting and early in the growing season that forced some growers to cast off conventional farming practices and get creative.
    In eastern Illinois, heavy June rains on top of saturated soils drowned out freshly planted corn in some areas, sometimes more than once.
    The solution to fill those gaps in their valuable farmland? Plant soybeans, which can be seeded later in the season than corn.
    However, harvesting grain from those mish-mosh fields could be challenging. Farmers will have to turn on their GPS steering systems and navigate their combines around islands of corn that were lucky enough to survive the early season washout.
    Even veteran crop scouts that claim to have seen it all were baffled by the sight of one field in Edgar County, Illinois. After pooling water drowned out parts of a corn field, the farmer replanted the areas with soybeans. But some of the corn along the edges of the waterlogged patch survived and emerged along with the soybeans, leaving several overlapping rows with nearly mature grain-yielding corn and soybeans.
    USDA claims to have accounted for washed out acres in their harvested acres estimates, but those uneven swathes of corn and soybeans may still cause headaches for Pro Farmer crop experts on Thursday night when they will gather at the tour’s conclusion to come up with their yield forecast for both crops.

    Photo: Crop scouts Roger Bernard and Doug Miller of Iowa and Ramiro Pereda of Argentina inspect soybeans planted in a corn field that was partially flooded this spring in Edgar County, Illinois.

Sharp edges on the leaves of corn plants, an unseen hole by the side of a field waiting for a car, a barbed wire fence protecting soybeans. All of these are hazards faced by crop scouts every year, not to mention the possibility of losing a boot in a muddy corn row.

But the biggest threat to scouts comes from farmers. Specifically, farmers who are infuriated by people trampling through their fields and damaging their crops. Stories abound about farmers making physical threats to scouts they discover in their fields.

Most farmers are placated after finding out who the crop scouts are and what they are doing. Leaders on the Pro Farmer tour carry a supply of baseball caps with them to offer farmers in a bid to smooth any ruffled feathers.

But one scout says he once offered a farmer a nickel for the three ears of corn pulled from a field after listening to a grower’s non-stop rant about how much money he had invested in the crop and how much harm the scouts were causing to the corn.

The problem stems from the fact that crop scouts do not ask permission to inspect the fields, a practice based on the idea that it is easier to beg for forgiveness than ask for permission.

To be sure, the majority of farmers met along the tour routes are incredibly polite and curious about any insights scouts might have about his crops and conditions in the area. Most farmers are aware that the tour is swinging through their area due to the media coverage and are happy to answer any questions tour scouts have about how the growing season is going.

This can lead to another problem, given a farmers’ propensity to turn short stories into long ones.

On Monday, scouts in northern Nebraska ran into the wife of a farmer who was startled to see three muddy scouts emerge from her corn fields and began yelling at them. After learning what the scouts were doing, the woman launched into a long monologue about how wet conditions delayed planting for weeks and how she had to tow her husband’s tractor out of the mud multiple times during the spring. She apologized for yelling but repeatedly said that she never knows what kinds of people might be snooping around her fields.

The conversation, while extremely friendly, caused the scouts to skip the survey of another field in the same county because they were now faced with the threat of missing dinner.