CROPS

When I have a wheat position on, that is when I am either long (bought) or short (sold). Even after 30 years of analysis and trading of the wheat market, I still have a tendency to notice anything that affirms my position first. It just happens.

I know that this is not an objective way to evaluate a market, and does not lead to the best decision-making. I also know that the awareness of this bias is the best and probably only antidote to its effects. So the fact that I own wheat fu- tures, say around $7.50, may lead me to seek reasons to own wheat and to de-emphasize reasons to sell wheat.

This is an anxiety-reduction emotional strategy familiar to anyone who owns or has owned wheat in a storage bin. So the first effort should be directed to finding a basis for selling wheat nowhellip;not particularly easy.

Chicago March wheat futures prices have fallen $1.64 per bushel since the end of November and $60 cents since the end of January. The pattern is clearly not price-friendly and it would take a move above $7.90 per bushel to even suggest a more-than-a-mere-wiggle change in trend. That is at least a 60-cent reversal from present levels.

The world is not running out of wheat. There is spring seeding in progress in the Ukraine, with moisture in place. South America is about to produce some very large crops of soybeans and corn. Global wheat buyers are in "Picky" mode, buying only to fill gaps in delivery schedules that have already been set with previous purchases.

There are certainly potential problems with production that could emerge and change the market landscape, but none are real yet. The drought in the US Midwest continues to be a factor, but the winter has eroded some of the sharp edges off of the drought monitor map. We will not know the real answer for a few weeks yet. Wheat is a very tough plant that can grow under difficult conditions.

With all of that said, what is the best thing to do now for a wheat owner? The fact that the market has already shaved off so much from the top is a risk reduction move. The market rarely extends such moves more than a few weeks beyond a seasonal change, and certainly the perception of risk is why the large speculative funds have reduced their net long posi- tions by as much as 80% in recent weeks. That removes a shadow over the market and may allow some recovery.

There are reasons to hold but not reasons to buy. Maybe anxiety reduction through position reduction is a good idea, but if that is the action choice, you had better get your buying shoes on afterward. A spring rally is coming. We just don't know from what level it will begin.

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 committed should be risk capital.