CROPS

The wheat market knows it is past mid-harvest and that yields in the US have been better than expected so far. The idea that the crop in the US is expected to be smaller than "normal" has been built-in, adjusted and displayed for weeks. Seasonal lows are expected; again the market is well aware.

The price adjustments in wheat that are actively being pursued are relatively small in scope and mostly based on indirect influences, like temperatures in the corn and soybean belt. On Tuesday, September Chicago wheat jumped 20 cents and closed at the highest level since June 26. The driver was mostly enthusiasm in the soybean and corn pits due to projected hot temps due to hit tender plants in the Midwest. Beans were up 24 cents per bushel and corn gained 21, drag- ging the wheat along for a ride.

On the other side of the coin, there is plenty of moisture in many Midwestern production areas, with record year-to-date rainfall in Illinois, Iowa and other key states. In my book the combination of rain and heat suggests lots of production, so even though farmers are worrying, it seems likely we will have a solid corn crop, with the beans right behind.

Outside the US, production expectations in Russia and northern Europe are still OK. Even as Russian wheat crop forecasters are reducing their projections in some areas, the overall crop is still expected to be some 42% larger than last year's.

China has been buying enough wheat to attract attention, as they purchased at least a million metric tonnes of US soft red winter wheat in the first week of July. The trade is expect- ing total Chinese purchases to end up pushing seven million tonnes (256 million bushels) of US origin wheat this year. The numbers certainly sound very good, and in a negatively trending market, the demand is enough to at least support wheat prices a bit, preventing a much uglier seasonal low from taking shape.

Even with the recent couple of trading session gains, the big trend-line for wheat is still weakly lower. The $6.52 per bushel low in Chicago from July 2 may end up being the mark for seasonal lows, but there has to be a stronger influ- ence from corn and beans together to really change the mar- ket's shape enough to name the cycle. The ideal pattern for this would be for wheat prices to pull back from the present surge to levels just above that early July point, and then push again higher, to emerge above whatever high point emerges from the present move up. That would be a "tradable" 1-2-3 pattern.

Commercial traders have increased their ownership of wheat futures in Chicago to 77,984 contracts net "long" (pur- chased). The higher this number goes, the more dramatic the price move up will be when they begin to liquidate, probably after harvest.

Risk for owners of wheat is lower now than it was last fall. Pacific Northwest white wheat growers are at least able to think about something other than Monsanto GMO wheat controversies, as there has been only the sound of crickets coming from the media and government agencies press of- fices around the issue. No further presence of GMO wheat has been detected despite vigorous investigation, and Ag Sec- retary Tom Vilsack has tried to reassure Japanese and Korean buyers. Seems like the issue will die unless something new comes along.

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.