CROPS

The trend in wheat has not been positive for nine weeks, although depending on what week you chose, it was either at the high end or the low end of an 88-cent range that was defined right at the beginning of the period since the last two weeks of July, with the upper end around $9.44 and the lower about $8.56. 88 cents per bushel is a lot of money.

A single futures contract, or "one-lot", is 5,000 bushels. Around here that might represent all of the production of 45 to 65 acres of good wheat ground. In the Midwest it reaches 100 acres or more. 88 cents equals something close to $50 per acre.

For many producers, that may be close to the net profit for the entire year's effort. This is why farmers talk so much about the price of wheat, and why a range-style market is stressful. At the top of the range each week or so, it feels great, the producer's IQ rises and life is sweet. Then the next week at the range low, the IQ falls and the producer won- ders why he or she thought farming was so great, or "why in *&% didn't we make a sale last week?" The paycheck is subject to change.

Apparently the wheat and other grains have found a bal- ancing point, even if it is nervous and tippy. In the background looms the fabled "fiscal cliff". The media and politicians seem to want to make the year-end into a game of "chicken". It is artificial. Certainly there are significant policy and tax issues looming, although much of it is result of previous policy and tax issues (the same ones as today's) that were pushed com- fortably into the future. The future is now.

The solutions to this "cliff" are highly likely to be the same ones we applied before. The harvest of this will be volatile and difficult markets. Oh well. We have been able to survive this many times in the past. The shadow is not the market. Let's keep our eyes on the donut and not the hole, as Calvin Toye would say.

Wheat planting is about on time versus average accord- ing to USDA. There is moisture. Although not perfect, conditions are not extreme. We have to watch Australia and other global production areas for problems as the Southern hemisphere crop matures, but there are no looming disasters at this point.

The Commitment of Traders (COT) report from the Commodity Futures Trading Commission (CFTC) still shows "commercials" (firms that are in the physical wheat trading and usage business) in a very heavy "long" net position in wheat, while large speculative firms are on the opposite side. In the long-term history, this configuration means wheat will decline significantly at some point. It is a slow-moving indicator, but this needs to be watched care- fully for the next couple of months.

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 op- tions, it is possible to lose more than the full value of your account. All funds com- mitted should be risk capital.