CROPS

The overall wheat market is in a follower mode right now.

Corn was the primary driver of last Thursday's 37-cent collapse in Chicago. The USDA statisticians found 166 million bushels more corn than the average grain analyst had expected.

When corn went limit down, wheat was bound to follow, as a significant bit of recent demand for wheat had been for feed to animals instead of expensive corn. Now the math works better for corn feeding in many locations.

The drop in Chicago wheat triggered a quick 20- to 30-cent negative white wheat price reaction, but where Chicago March wheat contracts has fallen 45 cents since Midweek last week, Portland white wheat has recovered and ultimately only shaved off about a nickel.

This is a reflection of a relatively stable export demand market and the irrelevance of the feeder markets in the Midwest to white wheat.

Chicago wheat prices are more visible to the world than white wheat and at present the volatility of Chicago/Kansas City/Minneapolis wheat markets is much greater.

The trend in wheat prices remains strongly lower, but the true test for Chicago March contracts is the $5.76 per bushel level, about 30 cents below present.

If the price of soft red winter wheat holds above this Mid- December low, we may have the first bit of definition for a base from which wheat prices can seek a spring high.

On another note, Standard and Poor's (a private rating agency owned by McGraw- Hill, that will for a large fee, analyze your company or country and give you a grade) has downgraded an additional nine European countries' debt ratings.

Greece currently is rated "CC," which is off-the-charts bad (apparently a grade category invented specifically for Greece alone, as no other countries are lower than B-). Those Euro-zone countries that escaped a downgrade include Germany, Belgium, Ireland, Finland, the Netherlands, Luxembourg and Estonia.

This is meaningful information if you propose investing in bonds issued by these entities, but over the recent couple of decades, when the rating agencies issue a downgrade, it is too late for anyone to take action, such as selling out of the bonds.

Usually the damage has already been done. The rating is not a good predictor, only a descriptor.

The arrival of the long-anticipated downgrade suggests that the story of the failure of socialist entitlement states in Europe may be mostly already told.

The bankruptcy and default of Greece and possibly other Euro-zone cousins on their government bonds seems imminent and will certainly cause a ripple and a "liquidity event," meaning a global market environment hostile to sales of any government bonds, including our own, which in turn speaks of higher interest rates overall. For the Pacific Northwest, it probably means a more riskadverse business environment and slower growth, along with an even greater dependency on the Asia-Pacific Rim economic level.

Given current affairs, it is a relatively decent spot to be in, even if the markets become very tough.

Gary Hofer can be reached at 509-337-8417 weekdays between 8 and 11 AM Pacific Time. Comments and questions are welcome.

The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.