CROPS

I n the eight to nine trading sessions since July 11, Chicago wheat futures have declined about 40 cents per bushel, pushing down to new lows last seen more than a year ago.

Last year from mid-June to late July, triggered by an ex- tremely hot and dry early summer that decimated northern hemisphere wheat and corn crops, wheat experienced a dramatic run of more than three dollars per bushel to highs around $9.45 per bushel in Chicago. There is no comparable condition this year, as wheat production is much nearer nor- mal, so the price has given back the entire wild run-up in a steady decline from the peaks of last July.

The price of soft red winter wheat is now trading around $6.50 amid expectations that seasonal lows are due. The trendline is still negative, but the pressure is really off, unless corn and soybeans both come in with larger than expected crops.

White wheat prices delivered to Portland were between $8.40-$8.50 per bushel in early July of 2012. By the end of that month they were nearer $9.15. Today they are just over $7.17, a two-dollar drop from those heady days.

The next serious move in wheat is highly likely to be upward, given a reasonable period of time to work out pres- ent lows. Global buyers are building stocks back up from depressed levels from a year ago. The world seems, if not stable, at least quieter, both economically and politically, than it has been of late.

The sensitive point at the moment is the weather in corn and soybean country. A turn toward hotter and drier than nor- mal for August would put a bottom in the general lower trend for grain/food crops, and push the remaining wheat harvest to a rapid close. At present, the corn and bean guys are still scanning weather reports for signs of more rain. The USDA drought monitor shows trouble in New Mexico, Colorado and extreme western Kansas, not pivotal production areas.

One of the more compelling indicators of the probability of pending identification of lows followed by a price rise is the weekly Commitment of Traders (COT) Report from the Commodity Futures Trading Commission. "Commercial" firms - primarily those that buy, sell, use and handle physi- cal grain - are holding historically significant net long (pur- chased) positions in Chicago, Kansas City and Minneapolis spring wheat futures.

This reliable, but slow-moving indicator is warning that wheat prices are reaching the end of their long downward move. Meanwhile, the much more fickle "Large Specula- tive" entities as a class are heavily net "short" (sold) and must eventually switch sides in order to book profits.

It is always possible to project another 50 cents per bushel in a current trend direction, no matter how far it has come, but the balance of risk is beginning to bulge a little more toward the upside for wheat.

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.