Wednesday, May 11, 2011
Mississippi Flood May Inundate 3 Million Acres in Louisiana, Governor Says
Three million acres, an area almost the size of Connecticut, may go under water as the Mississippi River flooding moves south and threatens Louisiana.
“Based on inundation maps we are looking at, about 3 million acres in Louisiana will be under water,” Louisiana Governor Bobby Jindal said at a press conference in Baton Rouge yesterday. About 2,500 people inside the floodway may be affected while backwater flooding may impact 22,500, he said.
The river was expected to hold just below 48 feet (14.6 meters) for a day in Memphis before the floods move south toward Louisiana and then empty into the Gulf of Mexico past New Orleans in about two weeks. It was at 47.75 feet at 8:45 p.m. local time yesterday, according to the weather service’s website.
To relieve the threat to New Orleans and Baton Rouge, Louisiana’s capital, the U.S. Army Corps of Engineers may open the Morganza floodway. Opening the floodway halfway would inundate a swath of central Louisiana along the Atchafalaya River with 5 feet to 20 feet of water. The decision to open the floodway may come as soon as May 14, Jindal said.
“The trigger is 1.5 million cubic feet of water a second going past the Red River Landing,” Jindal said. “We are at approximately 1.36 million right now.”
Gasoline futures advanced amid concern that the flooding will disrupt fuel production and distribution. Futures rose 3.1 percent yesterday to $3.3797 a gallon on the New York Mercantile Exchange, adding to a 6.1 percent gain on May 9, the biggest since July 2009. The contract dropped 1.2 percent to $3.3385 today. Crude prices slid 0.1 percent to $103.78 a barrel.
Red River
The Red River Landing is 63 miles north of Baton Rouge, near where the Louisiana state line moves east from the river. The Morganza floodway is between the landing and Baton Rouge.
The Mississippi, the largest river system in the country and the third-largest watershed in the world, drains 41 percent of the continental U.S., according to the Corps.
The opening of the spillway would affect two refineries, according to Jindal’s office. One plant on the river may have capacity cut to 75 percent for two weeks, according to the state’s Department of Natural Resources yesterday. Anna Dearmon, the DNR’s communications director, said she couldn’t release the names of the refineries because of security reasons.
Alon USA Energy Inc. (ALJ)’s Krotz Springs refinery will be affected if the spillway is opened, Lisa Vidrine, director of the St. Landry Parish office of emergency preparedness, said in a telephone interview yesterday. Refinery officials said May 9 that they were doing engineering work on the possible building of a levee to protect the refinery, according to Vidrine.
Potential Destruction
“If the Morganza is not opened and the levees are breached, the downstream destruction would be worse,” Fred Bryan, a professor emeritus of renewable natural resources at Louisiana State University in Baton Rouge, said yesterday in a telephone interview. “Once the river, with that cutting capacity and speed, cuts a hole you better get after it because it’s going to erode away the cut very quickly.”
The rising water has interrupted coal shipments to power plants in Tennessee, flooded more than 100,000 acres of Missouri cropland, forced thousands from their homes and prompted the Corps to open the Bonnet Carre Spillway to reduce the river’s force through New Orleans.
On the Mississippi between New Orleans and Baton Rouge, there are 11 refineries with a combined capacity of 2.5 million barrels a day, or 13 percent of U.S. output, according to Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Valero Energy Corp. (VLO) was forced to reduce operations at its refinery in Memphis to between 80 percent and 85 percent of capacity because of the flooding, according to people familiar with refinery operations.
Barge Movements
Flooding limited movement of products in and out of the plant by barge, said the people, who declined to be identified because they aren’t authorized to speak for the refinery.
Entergy Corp. (ETR) expects “several inches” of water in its gas-fueled Baxter Wilson plant north of Vicksburg, based on a forecast crest on May 19, Jill Smith, a company spokeswoman, said yesterday in an interview. Gear and equipment is being moved to the second floor, and crews are sandbagging a low levee that protects the plant, she said.
NuStar Energy LP (NS) said it will suspend deep draft vessel operations at its St. James, Louisiana, terminal when the Mississippi River stage reaches 32 feet at Donaldsonville.
The river is forecast to reach that level May 13, Greg Matula, a company spokesman, said in an e-mail yesterday. Barge operations will stop when the river stage reaches 33 feet, which is forecast to happen May 15, according to Matula.
“The current forecast indicates marine activity could be suspended for one to two weeks,” Matula said.
A Word on Corrections
Today I’d like to share a couple of thoughts on the matter of the correction in commodities about which we have been so vocally warning, and which has now occurred.
After having written in early April about the possible market response to the end of QE2, specifically about it knocking the legs out from under the overbought precious metals and other commodities, the metals continued higher, causing some readers to express concern that we had led them astray. And any number of analysts opined that the market had already priced in the end of QE2 and thus, even after Bernanke’s press conference, had decided it was go, go, go for higher commodity prices.
Yet, I think it is always a mistake to credit “the market” with any real predictive value. Reactive, yes. Predictive, no. Benjamin Graham had it right when he first penned the profile of Mr. Market as being a maniac, as likely to overpay for an asset as he is to sell too soon.
Put another way, if Mr. Market were actually in possession of a crystal ball, then gold would already be at $2,000 and silver at $75, and higher – because that’s where the underlying fundamentals of the economy will eventually drive them. Just not quite yet.
So, what do I think about the current sell-off? First off, it was way overdue, and anyone who wasn’t leveraged to the wrong side of the sell-off and who had built some cash should be thrilled that it has happened.
Silver, in particular, has been hammered – down over 30% at one point. Now that’s what I call a proper correction. Is it safe to go back into the water? I have to believe that the speed and depth of the sell-off makes it all the more likely that we’ll see a pretty quick bounce back.
While no one can know when, or perhaps because no one can know when (and we still have yet to see the actual economic consequences of the end of QE2), my suggestion would be to start buying in weekly or bi-monthly tranches of somewhere between 25% and 33% of the total cash you intend to reinvest in the metals and related investments. Already, the metals appear to stage something of a comeback, but that doesn’t mean it’s all blue sky from here.
By buying in tranches, you might not hit the exact bottom – but trying to hit the bottom is a fool’s game.
If you didn’t raise cash as the metals spiked higher over the month of April, or even paid up for gold, silver etc., don’t kick yourself (unless you were leveraged to the upside, in which case I can only empathize and wish you luck). Even if you paid $50 an ounce for your last ounce of silver, you will come out just fine in the end, because the monetary system of the U.S., and the world, is corrupt and degraded beyond redemption. It will falter and likely fail, and in time everyone will be scrambling to pick up their precious metals at substantially higher prices.
We’ll have more on this topic, and on what the future holds, in the brand-new edition of The Casey Report, which will be released this week. Renowned financial experts like John Williams of ShadowStats, James G. Rickards, Mike Maloney and others give their take on what to watch for. You can read it fresh off the press with your risk-free 3-month trial, with full money-back guarantee.
China urges US to lift export controls
 |
| China-US trade balance © AFP/Graphi |
WASHINGTON (AFP) - China urged Washington to lift export and investment controls directed against Beijing, saying such a move could go a long way towards conquering the steep trade imbalance between the two powers.
But in their annual bilateral dialogue, US officials continued to press Beijing over its allegedly undervalued yuan as a way to redress China's $273 billion trade surplus with the United States.
"The way to resolve this imbalance is to ease the export control regime of the United States towards China and to encourage US exports to China rather than restricting Chinese exports to the United States," Chen Deming, the Chinese trade minister, told reporters.
Chen said Washington's forex argument over the trade issue between the world's two largest economies "is not founded."
Over the past three years, he said, China's overall trade surplus has continued to decline and fell to about $180 billion, or 3.1 percent of gross domestic product.
By international standards, that is "a very healthy share," he said.
"We have a balanced trade with all other countries except the United States," he added.
Earlier US Treasury Secretary Timothy Geithner opened the two-day US-China Strategic and Economic Dialogue by placing China's need for a more flexible exchange rate and more open capital markets top of a list of things to discuss.
Chinese officials said later the yuan was not discussed on Monday. A senior US official said Geithner would raise the issues of currency and economic rebalancing in greater depth on Tuesday.
In his opening remarks, Geithner also listed China's need for banking reforms to boost its private sector, and the need for "a more level playing field" in trade and investment between the two economic superpowers.
Chinese Vice Premier Wang Qishan called addressing economic imbalances "a long process."
"It's not something we can do overnight," he said, speaking through an interpreter. But he noted the country had made progress since last year's talks.
"China has made headway in combating intellectual property infringement, promoting the use of legal software, and improving policies regarding indigenous innovation and government procurement," Wang continued.
He pressed Washington to "take credible steps to relax high-tech export controls vis-a-vis China, recognize China's market economy status, accord fair treatment to Chinese companies investing in the United States and refrain from politicizing economic and trade issues."
In the same way that Washington asks Beijing for a schedule on how it will address US complaints, Wang said, China is seeking a timetable on when the US export controls and other issues would be resolved.
Chinese firms seeking to buy sensitive US technologies or invest in US tech firms -- especially those with security- or military-applicable technologies -- must get approval, and denials and delays have angered Beijing.
In the past three years, for example, Chinese mobile network equipment giant Huawei has been stymied in two attempts to buy US technology companies, and was also blocked on national security reasons from selling equipment to top US mobile phone provider Sprint Nextel.
Both sides emphasized the progress they had made on economic relations, and stressed that cooperation will remain crucial for the global recovery from the 2008-2009 economic downturn.
But Geithner called on China to adopt a "new growth model, driven by more domestic demand, with a more market-based economy and a more sophisticated financial system."
Separately, Geithner also highlighted the need for China to strengthen intellectual property rights and to be more welcoming to foreign investors.
Wang suggested the United States needs to do more on its own to strengthen the world economy. "The key to global economic recovery still lies with the United States," he said.
The talks come as the world's two biggest economies grow increasingly intertwined. China is the biggest foreign financier of the yawning US public debt, with US bond holdings of $1.154 trillion in February.
Asked whether China was concerned about ratings agency Standard & Poor's outlook downgrade on US sovereign debt, Zhou Xiaochuan, governor of the People's Bank of China, said only that the Chinese central bank and other major financial authorities "must rely more on the internal assessment that we make and should not just rely on the credit ratings provided by big... firms."
© AFP -- Published at Activist Post with license