CROPS

There is no sign from the wheat market that the great price rally of summer 2012 is complete -- no chart "sell-me" formation, no measureable change in the weather pattern that has sizzled up the wheat price in Chicago $3 per bushel to $8.95 in 20 trading sessions, and few traders with the gusto to actually sell into the path of such a "Northbound Express" freight train.

So what accounts for the growing contrarian emo- tion, the drive to anticipate a selling point and capture the high? We know that prices cannot go up forever. We know that the more extreme the move in one direction, the more extreme the in- evitable reaction will be. We have all seen this kind of move before, where the market goes to levels that are not rational in light of the day-to-day business of moving wheat from the producer to the consumer. The thing will come to an end, with the only problem being when will the arrow turn back toward earth? We must be close in both time and price, but close is a rela- tive term. Right now a small miscalculation could be 50 cents per bushel!

The all-time high was touched four years ago in Chicago at $13.49 per bush- el, but the market was only at that level for about 15 minutes on Feb. 27, 2008. Within four trading sessions, it was back to a more "rea- sonable" $10.57, $3 lower. In the end, that rally dropped over the next 10 months into a low of $4.71, a whopping decline of $8.78 per bushel from the high. Talk about your "falling arrow!" The moral is that every violent upward price move ends violently, and is usually not obvious at first.

The Commitment of Traders Report now shows "Commercial" wheat trading entities net short (sold). On the other side of the ledger, "large speculative" traders are net long for the first time since April 2011, a period followed by a $2.50 decline in wheat prices. This pattern of wheat market position structure has been seen only five times in the last eight years, with four of those events marked by significant declines shortly after.

Bottom line: The price trend for wheat is up, still being driven by corn weather losses. Even though there is a clear chance that the disaster in corn and possibly later in soybeans may end up making history, there is a vibe that says go ahead and make some sales. For Pacific Northwest wheat producers in general, it is a rare gift, with a decent harvest at hand and great prices at the same time. Complacency is the enemy. Meanwhile, count the blessings.

Information and opinions contained herein come from sources believed to be reliable, but are not guar- anteed 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.