CROPS

The mind of the wheat market is pondering a seasonal low. $6.35 - $6.38 - $6.36hellip;The last three lows printed by the Chicago December futures contract, all within the last three weeks and all within three cents of the lowest the contract has traded in its existence.

Following each low, the price has rebounded at least 15 cents within a few days. The pattern suggests that each time wheat gets down to the mid-$6.30's there is some buying support discovered and/or the selling pressure weakens, but there is not enough upward demand to carry the price into a new positive trend. The market is seeking the emergence of a strong enough factor to change the pattern. The buyers are watching, but see no reason to rush purchases at present.

One market creature strong enough to lift prices in the near-term is a group of buyers known as the "large specula- tive" category of traders, as identified by the Commodity Futures Trading Commission (CFTC). This class of traders is presently reported to be holding a relatively large net short- sold position in wheat futures (46,731 contracts). This group swings back and forth between net short-sold and net longbought over periods that sometimes last a year or more, but occasionally shift rapidly from one side to the other.

Historically we have seen spec shorts' extreme maximums in the mid-50,000 contract range - usually just before a significant wheat price rally fueled in part by the buying energy generated by their rush to close out open-sold contracts. The specs have been increasingly short this year and will even- tually sponsor a "short-covering" rally. When that occurs depends on the emergence of something that spooks the herd, perhaps Chinese buying, perhaps bad harvest weatherhellip;

The recent price relationship between corn and wheat has shifted in the last year as more wheat has been consumed as feed, due to short supplies of corn and bean meal. The price difference, or "spread," between corn and wheat has increased from a "normal" $1.25 wheat over corn to about $1.80. Over the last 30 years, wheat has been priced above corn between $.50 and $2.00 cents virtually all the time (the exceptions being one very brief period in the fall of 2011 when corn was driven by hot weather to extreme highs, leav- ing wheat behind (20 cents below corn) and once again last spring when it looked bad for corn production due to exces- sive moisture). The current spread is above normal, but not enough yet to be a heavy influence. As early harvest this fall allows more corn into the feed channels, wheat will have to find demand elsewhere.

When a market runs out of large stories to tell, with exag- gerated villains and heroes, the focus is tightened and turned inward (the same thing humans do when they are bored). This is the dominant guide for many markets right now. Fear is a very poor guide for decision-making - probably even worse than greed. But boredom may also lead to impulsive and poorly considered actions. The wheat price trend will change soon. Seasonal lows are due to be identified (always in the rear-view mirror) and the "Specs" are short. Patience will bring a paycheck.

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.