CROPS

Rules for trading wheat, or anything else that has a changing price: (1) Know the trend before any de- cision is taken. (2) Do not trade or hold positions against the trend. (3) No trend, no trade.

Sometimes the tough part is just identifying the trend. The definition could be a moving average of recent prices, or even as simple as putting a printed chart on the table and looking at it from a few feet away. If the pattern shows that "it" is moving lower in price, there is no reason to get out the mi- croscope, or do a page of calculus. Just don't buy it (or hold onto it if you already are in it) until the trend clearly changes.

Long-term or short, there are very few occasions in which something that has become "cheap" cannot become even cheaper. And it is virtually impossible to capture the absolute low of anything. The dominant factors driving the price trend downward, no matter how great the stories coming from the forecasters may be to the contrary, will remain active until some point at which new factors emerge.

First notice available of the change will be in the trend line. No one, including the "insiders" can know the actual low point ahead of time. Once the new trend is at least possibly identified, the risk is reduced - not eliminated, but reduced. For most of us humans, that is the best we can do, and it does work.

The trend this week in wheat is lower. The driving factors that were holding wheat up last summer and fall - drought in the Midwestern US, crop failure in Russia, and poor condi- tions in Australia - are all old news. The market anticipated support from increased export demand for US wheat this winter that has not materialized.

Australia and Argentina's wheat crops were reduced, but not enough to tilt global markets. Now the prospects for a very big corn and soybean crop from Brazil are looming in the market's vision, and winter has provided at least some relief from drought in parts of the middle US wheat and corn country.

The USDA reports last week were actually somewhat positive on their face, with lower than expected ending stocks of wheat, mostly because of animal feed demand. When the market ignores positive news, it is a clear sign of a strong trend in place. It will take a rally in Chicago wheat above the high point from February 8 at $7.70 or so to even consider a change to and upward trend definition for now. On Tuesday, Chicago wheat closed at about $7.31, so there is plenty of room to back and fill without disturbing the pattern.

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