CROPS

A cross the US and now into Canada, combines are be- ing air-blown off and carefully parked, to await win- ter overhaul and prep for yet another harvest season. Wheat producers have their calculators warmed up and have begun to sell off or ship previously sold grain to pay the sum- mer bills. The buyers of wheat are also watching the markets a bit more closely now.

On Tuesday, Chicago wheat prices opened almost a dime higher following the three-day Labor Day weekend, but there was not enough power for warp-drive, so we fell back onto impulse power and could not leave orbit. Within the first 40 minutes of the morning session, wheat prices fell back 10 cents and finished the day well below the lows for the entire previous week, a solid repudiation of the idea of an immedi- ate new upward trend.

The last up-days the Chicago wheat market experienced were Friday August 23 and Monday the 26th, only two days up for a range of 38 cents per bushel: a nice move and a relief to post-harvest wheat owners.

It amounts to a suggestion that we have begun the process of forming a seasonally-appropriate low, but the low just before that weekend were life-of-contract lows for the lead- ing futures, the culmination of a year of downward trending prices. It would be rare to see such a long period of flat-to- downward movement end with any one extreme move. Usu- ally the a market works back and forth to confirm that there is consistent buying support at a low before pushing into a new trend.

The factors that underlie the long downward chart slope, although mature, are large and slow to fade. This year, the recovery of the wheat, corn and soybean crops from a short production year in 2012 has seen a return to much better growing conditions over the entire northern hemisphere, al- lowing a relaxation from previously higher prices. The pro- cess of "consolidation" may take at least a few more weeks, as the corn and soybean harvests rapidly approach.

One of the big problems for wheat prices right now is that the Middle East - Egypt in particular - is traditionally a very large importer of wheat. Business is not easy to execute in this key region today, and there is little hope for any quick resolution. It is not difficult to perceive that we also face el- evated chances of other emerging negative economic factors. Uncertainty of this nature is a drag on wheat prices at present.

All markets depend on some kind of story to lead the way, even if the story turns out to be incorrect. The present price always depends on the collective perceptions among all buyers and sellers, including producers, shippers, proces- sors, consumers, speculators, governments and international financial agencies. The group is large and diverse enough to prevent any one sector from gaining control, although there are brief periods when one or another of the categories is able to influence prices.

The problem is ultimately self-correcting. The cure for low prices is low prices, and vice-versa. Right now, we are at or near a one-year low for wheat in general, evoking a perception of relative cheapness, although historically pro- ducers have seen prices above six dollars per bushel only in the last seven years. There is reason to expect wheat prices to rebound over the coming months, but we do not have the "story" to move the buyers into action yet.

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.