CROPS

Sometimes great trading wisdom can be found in old aphorisms or sayings. When asked whether it is better to be smart or lucky, one famous trader is said to have responded: "Some people are really lucky, and they are born smart, others are even smarter and they are born lucky."

Most of us have heard "The trend is your friend" or even Calvin (speaking to Hobbes): "You know, Hobbes, some days even my lucky rocket ship underpants don't help."

Right now, the saying that seems to fit the wheat market is, "Never sell a dull market short". That old saw is really referring to any quiet situation that seems to have lost all mo- mentum. The futures market's job is to reflect the balancing point of supply and demand, taking account of all possible relevant future developments. The price of a futures contract is not properly seen as indicating what is present, but what is likely to be present, which brings to mind another really cool saying, "I skate to where the puck is gonna be, not to where it has been". Wayne Gretzky could have been a futures trader.

The wheat market is facing a harvest that is rapidly gaining definition. As harvesting activity moves northward across the plains, now in Kansas, the statistics of yield and acreage be- come history. Each day the perception of the trade becomes more clearly defined. Whatever spring wheat was intended to be planted is already in the ground, and crop conditions are observed carefully across the northern hemisphere.

It is clear that there will be a decent wheat crop this year, globally speaking. There was a day when "local" conditions, i.e. the US wheat crop, were enough to judge the market price, but today, significant wheat is grown nearly every- where in the world. The futures market has acknowledged this reality already, with a general trend lower, dating back to last July. The defining low points of the last 3 months have been the lows of April 1 ($6.60), May 21 ($6.74) and June 17 ($6.74), all based on the leading contract at the time. The present price of the leading contract in Chicago which expires in September is about $6.85, just above the lower range boundary. A failure to hold above this boundary would strongly suggest that the collective perception by the many thousands of traders, producers, handlers with actual money in the market (as opposed to merely academic interests) is that there is too much wheat in the world to justify the present price level. Until that event occurs, the market is indeed dull, and most traders are on hold.

BTW, "Never sell a dull market" emphatically does not mean "buy a dull market". It does suggest that complacency is to be avoidedhellip;pay attention (and keep your lucky rocket ship underpants on). 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 op- tions, it is possible to lose more than the full value of your account. All funds com- mitted should be risk capital.