The MasterCharts: December 2007
Subscribe to The MasterCharts Feed Subscribe to The MasterCharts by Email

Gold & Silver 24 hr Spot

24 Hour Spot Gold 3-Day Overlay 24 Hour Spot Silver 3-Day Overlay

Note: Green is today (or last trading day)


Saturday, December 22, 2007

On Charts


Worth a thousand words
Dec 19th 2007

A good graphic can tell a story, bring a lump to the throat, even change policies. Here are three of history's best

IT WAS at a dinner party in 1856 that Florence Nightingale met William Farr. The Lady of the Lamp was already famous for nursing British soldiers wounded in the Crimea; Farr, the Compiler of Abstracts in the General Registry Office, was widely recognised as an innovative statistician. Both cared deeply about improving the world through sanitation; both understood the importance of meticulous records in providing the evidence needed to bring about change.

Graphic News
Graphic News

Farr was the first to compile "mortality tables", listing causes of death in the general population; Nightingale compared his numbers with her own on the deaths of soldiers to great effect. By showing that even in peacetime a soldier faced twice the risk of dying in a given year as a civilian, she campaigned successfully for better conditions in barracks. The pair were instrumental in setting up a royal commission of inquiry into sanitary conditions during the Crimean war.

Although remembered as the mother of modern nursing, Nightingale was an accomplished statistician too. She was particularly innovative in presenting data visually. The example above, of a type now known as "Nightingale's Rose" or "Nightingale's Coxcomb", comes from her monograph, "Notes on matters affecting the health, efficiency and hospital administration of the British army" published in 1858. In the same year she became the first female fellow of the Statistical Society of London (now Royal Statistical Society).

The chart displays the causes of the deaths of soldiers during the Crimean war, divided into three categories: "Preventible or Mitigable Zymotic Diseases" (infectious diseases, including cholera and dysentery, coloured in blue), "wounds" (red) and "all other causes" (black). As with today's pie charts, the area of each wedge is proportional to the figure it stands for, but it is the radius of each slice (the distance from the common centre to the outer edge) rather than the angle that is altered to achieve this. Her principal message—that even during periods of heavy fighting, such as November 1854, far more soldiers died from infection than from wounds—can be seen at a glance. She sent the chart to the War Office; and it is a fair assumption that it contributed to the improvements in military hospitals that she brought about.

Nightingale's chart is a beautiful and persuasive call to action, but it is not perfect. The red, black and blue wedges are all measured from the centre, so some areas mask parts of others. The numbers of deaths from the various causes are not stated—although, to be fair, it was their relative size that Nightingale wished to show.

Graphic News
Graphic News

The chart to the left also tells the story of a war: Napoleon's Russian campaign of 1812. It was drawn half a century afterwards by Charles Joseph Minard, a French civil engineer who worked on dams, canals and bridges. He was 80 years old and long retired when, in 1861, he called on the innovative techniques he had invented for the purpose of displaying flows of people, in order to tell the tragic tale in a single image. Edward Tufte, whose book, "The Visual Display of Quantitative Information" is a bible to statisticians, calls it "the best statistical graphic ever drawn".

Minard's chart shows six types of information: geography, time, temperature, the course and direction of the army's movement, and the number of troops remaining. The widths of the gold (outward) and black (returning) paths represent the size of the force, one millimetre to 10,000 men. Geographical features and major battles are marked and named, and plummeting temperatures on the return journey are shown along the bottom.

The chart tells the dreadful story with painful clarity: in 1812, the Grand Army set out from Poland with a force of 422,000; only 100,000 reached Moscow; and only 10,000 returned. The detail and understatement with which such horrifying loss is represented combine to bring a lump to the throat. As men tried, and mostly failed, to cross the Bérézina river under heavy attack, the width of the black line halves: another 20,000 or so gone. The French now use the expression "C'est la Bérézina" to describe a total disaster.

In 1871, the year after Minard died, his obituarist cited particularly his graphical innovations: "For the dry and complicated columns of statistical data, of which the analysis and the discussion always require a great sustained mental effort, he had substituted images mathematically proportioned, that the first glance takes in and knows without fatigue, and which manifest immediately the natural consequences or the comparisons unforeseen." The chart shown here is singled out for special mention: it "inspires bitter reflections on the cost to humanity of the madnesses of conquerors and the merciless thirst of military glory".

Graphic News
Graphic News

The chart to the left is the earliest of our three. It was published in 1821 by William Playfair, a Scottish engineer, political economist and scoundrel: he was convicted of libel in England and swindling in France. Alongside these many and varied skills he was also an engraver (he produced some of James Watt's engineering drawings), which explains this image's handsomeness, with its delicate shading and ornate attribution.

Playfair liked controversial topics. He drew a chart comparing tax levels in various countries in order to show that Britain's was too high. He was the first to show imports and exports on one chart, shading the area between the two to indicate the balance of trade and explaining that the intersection of the lines showed a shift in favour of one country or the other.

This chart, his most famous, shows the "weekly wages of a good mechanic" and the "price of a quarter of wheat", with the reigns of monarchs displayed along the top. It is a little difficult to see the point Playfair wished to make: "that never at any former period was wheat so cheap, in proportion to mechanical labour as it is at the present time". Presumably he was not familiar with the idea of combining two variables—prices and wages—to make a third—affordability. Still, he should not be overly criticised for this. For a start, his conclusion was correct. Statisticians have used his data to plot wages divided by prices (showing how much wheat a week's wages would buy) against time, and the point becomes clear—as, incidentally, does a more subtle one: the increase in buying power was slowing down.

And Playfair was already making a leap of abstraction that few of his contemporaries could follow. Using the horizontal and vertical axes to represent time and money was such a novelty that he had to explain it painstakingly in accompanying text. "This method has struck several persons as being fallacious", he wrote, "because geometrical measurement has not any relation to money or to time; yet here it is made to represent both."

He was the first in a series of economists, statisticians and social reformers who wanted to use data not only to inform but also to persuade and even campaign—and who understood that when the eye comprehends, the heart often follows. Nightingale hoped her charts would liven up her publications; the queen, she thought, might look at the pictures, even if she did not read the words.

Not everyone thought it was right to include such fripperies in a sober publication. "We do not want impressions, we want facts," Farr wrote to her in 1861. "You complain that your report would be dry. The dryer the better. Statistics should be the dryest of all reading." Fortunately, she ignored him.

Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved.

Monday, December 10, 2007

A look at Soft Commodities

Resource Investor - News that trades

US Farms, Inc. - A Different Kind of Natural Resource Company

By Jack Lifton
10 Dec 2007 at 12:49 AM

DETROIT ( -- In my previous articles, I have concentrated on providing current information on metals and groups of metals, so I have mostly mentioned and discussed companies in the mining and mineral processing industries. I got to thinking that the term 'natural resource' really covers a lot more than just mining metals and minerals and the production of energy resources such as coal, oil and gas. So today I would like to take a look at a different kind of natural resource company; one dedicated to the renewable production of agricultural products, i.e., a farming company.

There are a lot of publicly owned farming companies out there, both large and small. Well-known companies like Chiquita Brands [NYSE:CQB] or Del Monte [NYSE:FDP] abound, as do smaller ones like Calavo Growers [NASDAQ:CVGW] and Griffin Land & Nurseries [NASDAQ:GRIF]. However, in keeping with Resource Investor’s tradition of being the first to identify new start-up and growth (excuse the pun) opportunities, I would like to look at a small firm near San Diego, California, American owned and operated, called US Farms, Inc. [OTCBB:USFI], which recently came to my attention through a conversation with a friend in California.

US Farms is interesting in a number of ways: the crops that it raises, the new farming technology it has implemented and the potential for the growth in volume of these products resulting from some rather creative use applications and production techniques.

At first glance, US Farms looks like a fairly normal farming operation. It is a diversified farming and nursery company. The nursery unit, which provides a full range of ornamental products like Aloe Vera, Cactus, Jade, Palm Trees and Cycads, is a relatively small unit of the company, providing only about 4% of sales. The biggest revenue generator currently results from is the growing and brokering of the food crops, asparagus, tomatoes, and garlic, and the growing and harvesting of Aloe Vera for use as an ingredient of patent medicines and cosmetics.

In the first quarter of each year, US Farms is one of the largest U.S. growers of asparagus. Being in the temperate climate of Southern California allows US Farms to time its harvest to the December through March period where little domestic, American, competition exists, resulting in an ability to command premium prices. Tomatoes and garlic are sold throughout the year, with garlic being sold as fresh, dehydrated or seed stock. While severe competition for dried or dehydrated garlic from China is felt, most of US Farms’ output is sold as fresh and the brokering side of the business is able to benefit from marketing the Chinese dried product to its, US Farms,’ established customer base.

To effectively compete with other growers and importers, US Farms has implemented some “leading edge technology,” at least as it applies to a profession almost as old as man. One of these is the practice of ‘shade farming’. The company has a ‘shade house’, built at a fraction of the cost of a glass greenhouse, with a proprietary cover cloth that deflects the ultra violet rays of the sun. This keeps it from burning the plants and creates an environment that reduces plant stress and stimulates up to 35% above average growth. Coupled with a computerized watering system, you get “organic farming on steroids,” thereby improving returns.

The item I found most interesting however, was the Aloe Vera production and some of the plans US Farms have for marketing it. The company is very active in traditional Aloe Vera market, being one of the largest U.S. growers. It wholesales Aloe Vera leaves on a national basis selling bulk Aloe Vera, leaves and plants to grocery stores, and processors, as well as selling landscape and house plants through its greenhouse unit. It is the synergy of this ability to produce substantial quantities of Aloe and its in-place nursery business that may allow US Farms to strategically position itself in a future market for Aloe Vera and other such succulents.

Aloe Vera is widely known and used in homeopathic medicine. My grandmother used to refer to it as a ‘medicinal miracle’. In our family, we used Aloe Vera for everything from treating burns and cuts to hair and scalp treatment and even for treating constipation in babies. However, one aspect of Aloe Vera that most people don’t think about is that it doesn’t catch fire or burn very well. If fact, when I tried to ignite a (large) plant, it just melted on my barbecue and put out the fire. Being a large succulent, it should be pretty effective as a fire barrier. With all of the wildfires that have taken place in the San Diego area; this solid, typically grown as a, 2 ½-foot-high succulent may find popularity as a hedge-type plant that could afford added fire protection to property.

Aloe matures in about 2 ½ years, growing about a foot a year, and is about half water or ‘juice’. Being a succulent, it can survive drought, storing water, when moisture is available, in its leaves. These leaves can become fairly massive. Mature leaves sold by US Farms weigh up to 5 pounds and there are 8 or more to a plant. Imagine what a nice barrier a series of rows of Aloe would produce – plus they look nice and have attractive yellow flowers. As Kermit the Frog used to say, “it’s not easy being green,” especially during a drought in Southern California, but Aloe Vera manages to do it, and thrive. I understand that US Farms has actually broached the subject of Aloe Vera crops being grown for profit along California highway right of ways and, instead of paying to use the land, being paid to use it as a fire break filler.

The company has a number of other interesting approaches to the business, some of which are currently being put into place, which I can cover in future articles. One of the ideas under investigation is the potential of some of the cacti and succulents, including types of Aloe Vera, as a remediation crop for old mining properties. Aloe Vera will grow on some pretty sparse soil, with limited moisture required, so the plants might work in areas that don’t freeze and have soil with little contained humus. The latter tends to be a characteristic of many of the old strip mine properties.

One big difference that I see in US Farms, vs. many of the junior mining stocks I have reviewed, is a real cash flow. While not yet showing a profit, as the company is in a ramp-up period, and many of its plantings are yet to mature, they do generate a rapidly growing cash flow.

Sales, for the 9-month period ending September 30, 2007 (unaudited) grew from $214,509 to $6,802,764 over the same period in 2006, based on data contained in the company’s 10-Q. Accounts receivable are on the high side, again reflecting the ramp-up period, at approximately $2 million. In the long run, however, this represents future cash flow. Growth projections by the company are for sales in the $28 million range by the end of 2008, with a further doubling in 2009.

Taking a look at a natural resource company like US Farms might make sense for those seeking diversification in a natural resource oriented portfolio. It holds personal interest for me as Aloe was a form of homeopathic medicine I grew up with. Having an aloe ‘fire barrier’ that can double as a medicine chest might make a lot of sense to homeowners in fire-prone areas and could greatly improve the future prospects of companies like US Farms.

I believe that the current Chinese demand driven commodity boom is going to force a rational environmentalism on the U.S., because we either will begin again producing the metals and minerals we need or we either will not have them or have to pay such exorbitant prices for them that our consumer economy might be forced to re-price some common items, such as personal electronics, as luxury items.

Remediation of mining sites is a growing business; if it becomes a mandatory part of business planning for mining don’t say I didn’t tell you about Aloe Vera and US Farms.

© Copyright 2007, Resource Investor.