CROPS

For wheat markets, with January in the books, we are looking at only a few weeks until the US winter wheat price begins the "silly season" of spring weather vola­tility. This year promises some extra spice as the relatively small planted acreage combines with weak subsoil moisture across wide stretches of plains wheat fields, which adds up to market sensitivity to short-term weather swings. The market tone of the last week has been pretty low and lazy as, for the moment, the trade has little kindling with which to start a price fire.

Production of wheat outside of the US shows few major problems looming. Certainly there are some areas project­ing trouble, but Russian and Ukrainian moisture is improv­ing (similar to US conditions). Other European wheat field moisture levels are either OK or maybe a little excessive. The Southern hemisphere harvest is done, with slightly below- average production results, but no current threats. There will be export wheat for sale in the coming year.

There are outside signs that global money flows may shift, with the US bond market weaker (higher interest rates) and the dollar index faltering. If the global money guys perceive renewed opportunity in commodities based on economic growth curves, then the funds will be buyers once again. Cur­rently the "Large Spec" category reported by the CFTC every week is net "short" (sold), and perhaps more significantly, the "Commercial" category is net "long" (bought) once again, after being historically extremely short last summer.

Eventually this big, slow-moving factor will produce more selling, but probably not until well into harvest season. The Commercials typically reach their largest net long positions at the price lows each year. This is not because they know what the market is doing or even care much. It is because they buy futures as they sell off wheat they have acquired and make new future commitments to deliver physical wheat they have not yet purchased. It is actually quite a reliable indicator, but awfully slow to show up.

There is a short-term bias to rally, but it is not strong. Trad­ing ranges have tightened, so we can look for our favorite indicator, Chicago soft red winter wheat, to work within a relatively narrow $7.35 low end and $8.25 high end for some time yet.

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.