CROPS

Wheat, gold and the U.S. Dollar -- all internationally visible, all affecting everyday life for most of us, even if we pay no attention at all.

Wheat export prices are determined by competitive offers submitted to the requesting buyer, so the fluctuating value of the dollar relative to the buyer's native currency has a direct impact from Oka-san's shopping basket in Sasebo all the way back to the wallet of the guy sitting on the combine in Walla Walla County.

If the dollar is weaker versus the currency of another competing seller, U.S. wheat actually becomes less expensive for the buyer. If today one U.S. Dollar (USD) is worth 1.28 Japanese Yen, while last week it was 1.29 Yen, the USD is said to be "stronger" and this small difference translates back to about 5 cents per bushel on the price board in the window of the Farmer's Co-op office. No big deal, really, but it multiplies fast if you think of the millions of bushels coming out of Walla Walla County, for example.

USDA says that is usually around 17 million bushels, making that small currency value change theoretically worth about $850,000, much of which circulates through the local economy. Does the change in the U.S. dollar make a difference to us every day? You bet your bippy it does. Dollar up, wheat down. Dollar down, wheat up (to a point - the rest is beyond the scope of this article).

How about gold? In the eyes of the market, it's another kind of wheat. You can rely on its having a certain value under most conditions. It can be moved, stored or traded. You can't eat gold, but if you have gold, you can probably find some food with it. When the financial markets are full of fear, gold becomes known as a "safe-haven" for many investors, but owning gold can be a wild ride.

On Sept. 5, 2011, the leading contract of gold at the New York COMEX was just over $1,900 per Troy ounce. As of Monday, Jan. 2, 2012, the price per ounce was about $1,567, a 17 percent, $333 per ounce decline, so even with all the trouble in the world, gold gave an object lesson in volatility to all those who would buy for "safety."

There is no perfect place to hide when the markets are crazy. Still, the price levels of today's gold market are a reflection of the world's instability and the tendency for governments (borrowers) to inflate their currencies over time (but that is another story beyond the scope of this article). Even with the recent downward move, gold is still classified as being in an uptrend in the long-term pattern, and probably will be so for some time to come.

Wheat and gold are both directly affected by the value of the U.S. Dollar, as gold tends to rise when the dollar is declining and vice versa, just like wheat. So what can a trader do when trying to work out a plan for either of these golden commodities? Watch the dollar for trend change reinforcement. Right now, when the greenback, backed by the "full faith and credit" of the Ua.S. government is at least stable, if not strong. There is downward pressure on the prices of wheat and gold. But later, depending on how the world bankers and government authorities work out solutions to the global debt insanity, this may change, and it will show up quickly on the currency charts.