CROPS

On Tuesday morning, the wheat market was camped out squarely on the middle of the range line going all the way back to the third week of July. Chicago leading futures contracts were at about $8.70 per bushel, while Portland white wheat showed $8.78 or so. The center trend line is gently lower for the period. If Chicago futures break below $8.25-$8.35 in the December contract it will imply accelerating weakness. If the market can find the drivers to push above $9, a new upward trend-line will be created. Until one of these happens, it seems unlikely that market behavior will change much.

Eighty-one percent of the U.S. winter wheat crop has been planted as of last Sunday, in line with the five-year average of 80 percent for this time of year. USDA reports that 49 percent of the U.S. winter-wheat crop is up and growing, just a bit behind the five-year average. Australia, the world's second-largest wheat shipper, will probably produce 28 percent less wheat versus their last season, the lowest level in five years, after dry weather reduced yields. They are expecting 21.2 million metric tonnes in the 2012-2013 marketing year, according a Bloomberg report based on a survey of several analysts' ideas. That compares with 23.25 tonnes in last month's survey. The present USDA projec- tion is for 23 million tones. (One metric tonne is 2,204 pounds. Wheat is 60 pounds per bushel, so a metric tonne is 37.733 bushels.)

There are indications that U.S. wheat offered in international tenders over the last week have been $20-$30 per metric tonne higher that competing sources, equating to about 50 to 80 cents per bushel gross difference. There are two ways for this to be corrected; the market comes up to U.S. values or U.S. values drop to global market levels. If Russia backs off of sales as they run out of easy supplies, as they are fully expected to do, the world market will rise. Last Friday, Ukraine announced it may run out of exportable wheat stocks next month, fueling hope for greater U.S. exports due to reduced competition.

In the background, global markets for crude oil are trending lower, $86.80 on Tuesday, down from mid-September's $100 per barrel. Gold and silver both are both weaker, while stock markets are slipping, although still in the upward sloping range established in this election year. The U.S. dollar is working on coming up off of recent lows (negative for wheat).

Information and opinions contained herein come 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 com- mitted should be risk capital.