CROPS

Judging the wheat market, or any active market, is a continuous process. Those engaged in such a risky busi- ness know that guessing right about the future price is the Holy Grail of research. Of course there is a multi-billion dollar industry built around providing the "secret" of where prices will be in the future, but there is a common miscon- ception.

Many observers make the mistake of focusing on fore- casts or predictions of the future course of prices, when they would be much better served to concentrate on the underly- ing causes of what is actually happening in the present. If that emphasis is applied, then what appears to be "foreseeing" the future is really only a matter of understanding the current trend and what is driving it. When the factors change, the trend will change.

When a cardiologist reads an electrocardiogram with the express purpose of forecasting the likelihood of a heart at- tack, he cannot foretell the future better than anyone else, but he can look at the present state of the heart-chart, analyze the underlying factors and reach decisions about recommended patient behavior, which increase the odds of patient survival. Any consumer of research can benefit more by abandoning the idea of knowing where prices will be in x days, weeks or months and placing available forces on awareness of current behavior. This does not mean reading tea-leaves or listening to the "market chatter" from the talking heads on CNBC. Knowing the reason for the 25-cent rally in Chicago wheat Monday morning is of little value of itself. It is the context of the move that is yields value.

Northern hemisphere wheat harvest is essentially over. There are few surprises likely to emerge from direct analysis of the supply and demand for wheat. This time of year the market is digesting the crop development season for corn and soybeans, which is a strong, if indirect influence on wheat. Earlier in the season, absent extremes, the crop prog- ress reports and surveys always seem to show an increasing forecast for production. Then, when the probability of greater production begins to taper off and the crop matures, there is a peak followed by a shrinkage of the projections. The market adjusts prices every day based on the latest statisti- cal announcement, but the influence of the "crop production potential" factor weakens. There is more and more definition of supply, removing uncertainty.

All of the above is to point out that the downward pressure on wheat prices is declining now that the corn and soybean crops are maturing. The normal annual seasonal low for wheat is expected to be identified in this time period. The corn and beans were both late seeded this year, which means that the market is still weather sensitive, fearing an early frost. Wheat is unlikely to rally hard without help from corn and beans, both of which will have to continue the strong upward moves seen over that last couple of weeks.

Wheat jumped 25 cents in Chicago Monday, August 26, while Portland white wheat gained only a couple of cents. If Chicago can sustain the move off of the lows set last week, Portland will pick up some value as well.

The Chicago wheat market is much wilder than the Portland white wheat price. A 44-cent downward move in Chicago from the highs of August 1 to the lows reached only a couple of weeks later were reflected in Portland as only a 10-15 cent per bushel decline. A supporting factor that helped soften the response in Portland was the return of Japan to ac- tive buyer status for white wheat. Still, Chicago remains the most watched and influential wheat market, and is a leading indicator of wheat price trends for all producers. 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.