Monday, October 11, 2010

"The curious incident of the 300m bushels of corn" (BRK.B) CORN

Long time readers know that I've had some quibbles with Mr. Gartman (Dennis Gartman is an Idiot (BRK.B; DXY) regarding his understanding of Berkshire Hathaway and it's chairman.
(See links and chart after the jump)

Then there was his EUR/USD commentary. June 1 with the Euro at 1.22 he said it was "almost certainly" going under $1.20. Duh
We'd been making the same call since Nov. 2009 at $1.50.
The buck strengthened to $1.1877 and reversed, I think it was June 4.
On June 18 of this year he called the Euro doomed. That may be but it had bottomed two weeks earlier and  was on its way to kicking Yankee butt.

On the other hand he is a student of the grains. Here's FT Alphaville:
Dennis Gartman, fund manager and author of the Gartman Letter, is generally a very grounded sort of chap when it comes to investing ideas (politics aside).
Yes, he’s recently become bullish on gold. But he’s not the type to have been a perma goldbug. And one thing is sure, he does know a lot about soft commodities. In particular corn.
His fund invests directly in softs, and he’s been writing about the asset class for years.
Which is why, when Gartman alleges something strange is going on in the world of official US corn quota reporting, it’s probably worth listening.
In a nutshell, he’s miffed about the sudden appearance and subsequent disappearance of about 300m bushels of corn in official crop statistics, all in the space of about two weeks.
We reported on the former here. But now the bushels have gone missing again — and hence the following futures price reaction from Friday onwards:

Here are Gartman’s words, in any case:
COMMODITY PRICES HAVE SOARED, MOST NOTABLY GRAINS with the latter rising on what has to be one of the more astoundingly bullish crop reports we’ve seen in many, many years. Let’s mince no words here: the most recent USDA report have been utterly confounding in nature, with the Department first losing 300 million bushels of corn earlier this year and then surprisingly finding it again several weeks ago, and in Friday’s crop report losing another 300 million bushels. Our faith in the USDA’s data is reaching a new low, and so too is the faith of others. 

The USDA on Friday “guess-timated” the US corn crop to be only 12.664 billion bushels on a yield/acre of 155.8 bushels. Going into the report LaSalle Street had the corn crop “guess-timated” at something on the order of 12.975 billion bushels, which was itself rather bullishly compared to the previous USDA report of 13.16 billion bushels. In other words, the Street “missed’ the estimate by approximately 300 million bushels. Ending stocks of corn, which were expected to be 1.175 billion bushels were instead reported out at .902 billion. When the report was made public, one could hear a collective and very loud “gasp” from LaSalle Street....MORE
Back in June 2009 Mr. Gartman said "Gartman: ‘Warren Buffett Is an Idiot’ (BRK.A; GS)", decrying the fact that the Oracle had maintained Berkshire's equity exposure through the '07-'09 market collapse.

After reflecting for a few days (and being ridiculed by pundits and laughed at by small children) Mr. Gartman said "Gartman: Warren Buffett Isn't An "Idiot" .. But He Allowed "Inexcusable" Losses (BRK.A)":
...I am short Berkshire Hathaway right now for that reason. It continues to sell at a huge premium to net asset value, so I'm short of it and I'm long of Goldman Sachs. I'm short of Berkshire, and I'm long of Lowe's because they sell at discounts. But I think that Mr. Buffett made some terrible mistakes last year and when you're down 45 percent for a year, I'm sorry, that's inexcusable....
Not only was the short just terrible, it didn't even work as a pair trade against the S&P 500 which BRK uses as its benchmark* and which it resembles; if you added to the S&P superior management, dexterous market maneuverings, an awe-inspiring cash float from the insurance and reinsurance ops ($62 Billion year-end '09), retail and manufacturing operations that sport balance sheet foots of $49 Billion, a regulated utility in the U.K. and U.S., a large homebuilder, the country's third largest mortgage servicer the second (or is it now first?) largest real estate brokerage, the annual Warren and Charlie show and a really big train set for them to play with.
Here are the 53 subsidiaries.
*Selecting the S&P 500 as our bogey was an easy choice because our shareholders, at virtually no cost, can match its performance by holding an index fund. Why should they pay us for merely duplicating that result?
-Buffett, 2009 Letter to Shareholders
Here's the chart through the August 9 publishing date of the "WG is an Idiot" post (I'm too lazy to extend it but you get the point):