CROPS

The great sages tell us that all things seek balance. "Seeking balance" implies at least some swinging back and forth across some "per­fect" point, tracing a sinuous line as momentum rises and falls.

With a little contempla­tion, the natural movement of the market becomes "in­tuitively obvious", as Profes­sor Pyle, my old statistics in­structor often said. It sure is easy to see a trend when one is looking backward in time.

Thus a problem is created for us human beings, as we are all hard-wired to quickly identify patterns in things. The end of the trend is the tough call, especially when a directional movement has been established for some time and has become en­trenched in the mind of the market (i.e., the collective in­telligence of all of the thou­sands of decision-makers with actual money involved).

This is as true for wheat as it is for banking prac­tices, stock markets or sports teams. When a change in direction occurs following a clear directional move, it takes some time for partici­pants to shake loose from the spell.

Wheat has just about shaken loose from the down­ward move of the last few months. The catalyst for the shift from negative to positive was the January 11 USDA reports wherein inventory figures and pro­jected sales were announced, as well as the best "guvmint" estimate of planted winter wheat acreage.

The actual numbers are still being sliced, diced and discussed, but the bottom line for the wheat market is that there were no negatives in the report and at least one positive: last fall the acres planted to wheat were less than many market watchers expected.

It is well known that US winter wheat in the Midwest entered dormancy in the worst shape measured since official records were begun in the mid-1980's. Small acreage and poor condition makes the price of wheat sensitive to any perceived potential disruption. Since this vulnerability represents upside price risk, the market must seek balance among all of the competing influences and compensates with high­er prices (bearing in mind that it is a "futures" market after all).

By the time any of the ac­tual influences become mea­sureable reality, the market will have already accounted for that and will move on to the next anticipated factor.

Way down at the bottom line, we still must see export sales in the next few weeks to allow the prices of today to be validated. Today the price of Chicago wheat is 40 to 50 cents per bushel higher than it was on report day the morning of Janu­ary 11. White wheat priced for delivery to terminals in Portland, Ore. has gained about 25 cents in that time. It is presently about $8.61, taking some of the pressure off of those who have not yet sold all of their wheat from the harvest of 2012.

The short-term trend is upward, but Tuesday's wheat trade was negative about a dime in Chicago. Looks like the market will have to hunt a bit to find "balance" in the next few weeks.

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 com­mitted should be risk capital.