CROPS

United States wheat prices, on a big run, are showing no sign of exhaustion, even after a move up of $1.90 per bushel in just 12 trading days in Chicago, reaching $8 for September futures on Tues- day morning.

Portland white wheat has captured well over $1 per bushel for new crop in the same period, reaching $7.80 Tuesday morning. Virtu- ally all of this price enthu- siasm has been generated by drought conditions in the Eastern corn belt (Indiana, Illinois, Tennessee), but the heat has now begun to stress the entire Midwestern row- crop area. And now there are reports of heat-related crop shrinkage in Russia.

With just a little continued global demand, the combination of hot weather and anxious buyers could give us some real fireworks. There is no serious fundamental justification for an off-the- hinges rally in wheat prices, but sympathy with corn and soybeans will keep the price fire burning until it rains. The trend is strong, but by the time a top emerges, there will inevitably be some wild and violent price swings. One moderately wide rain forecast could break this market down hard.

Looking down the road a bit...

The European Union's banks Tuesday are really just a group of private or sovereign banks in various nations that agreed to coop- erate loosely a few years ago when the Euro-currency was established. Under duress they are evolving toward a truly controlled and coordinated banking system. The process is long, messy and politically difficult, but it is well known that private citizens and investors will give up a great deal of free- dom (sovereignty) to acquire stability when enough pressure is applied via economic "disaster," especially when it is perceived that some of the richest and most powerful will be relieved of the terrible responsibility of wealth and power in the process.

The centralizing of banking power in Europe is under- way. We should be observ- ing closely to see who will emerge on top. As comfort- ing as it is to think that the U.S. economy is separate and different, that is not true. Even a small 401(k) investor or retiree is subject to what happens "out there" and the best way to protect that capital is to be aware of what is happening and what the alternatives are.

The current trend lines for the stock market indices like the Dow Jones Industrials or S&P 500 are positive. The bond market has been unable to decide what to do for a month and has been going sideways as a result. There are dramatic possibilities for bonds in either direction, but for now the market is waiting for a sign. The next move for bonds will be a "Big Deal" when it comes. A break downward would be the most significant for most of us and speaks of higher interest rates ahead.

Information and opinions contained herein come from sources believed to be reli- able, but are not guaranteed as to accuracy or complete- ness. The risk of loss in trad- ing 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 com- mitted should be risk capital.