CROPS

Chicago December wheat contracts continue to pound away at their life-of-contract lows. Over the entire his- tory of active trading from mid-September 2011, the December contract price reached highs of $9.13 per bushel in November 2012. Since that time 10 months ago, the trend has been lower, with the lowest point a couple of weeks ago at $6.35½. On Tuesday, the Chicago December finished the day session at $6.42, $2.71 below last fall's high.

For most producers, that is a major shift in income po- tential. Even for a "small" farmer, that could represent many thousands of dollars of gross income. Portland white wheat moves more slowly than Chicago, but at this week's $7.08 is also well below its own November high point of about $8.70.

Of course, very little wheat is actually sold at the high, although there are some fellows down at the hardware store coffee table that claim to do so regularly. The problem is that when the high comes along, everything looks pretty sunny from the wheat owner's point of view. They can lie down at night feeling secure, with all that gold in the bin. The impulse to sell comes later, when the high is well past and the market sky is dark and cloudy. Throw the complexity of taxes and government programs into the decision mix and price logic sometimes is lost in the thicket. There are many times wheat is sold when bills come due rather than when the price would be best. Very few at coffee are willing to confess to selling the low, but someone is selling even then, I have just never met them.

On Tuesday, USDA's Risk Management Agency an- nounced their "Projected Prices for Small Grains" for 2014, with winter wheat at $6.72 and spring wheat at $7.54. The prices published are not intended for speculation, but more for setting crop insurance levels, although they do seem to suggest more of the same general price range we are trading right now. The primary source of data used to generate the official projection for Pacific Northwest wheat is the Chicago Board of Trade soft red winter wheat September contract.

Anyone venturing to learn how the USDA calculates such things had better have a fair amount of time available for research. One can become lost in the maze of data corridors produced by various sub-agencies of the USDA. See http:// www.rma.usda.gov/policies/2014/14 ceppwheat.pdf (page 8) for an example.

A "failure" to hold above the recent low at $6.35 futures price would be construed by many traders as a confirmation of the downtrend suggesting anther "leg" lower. It would mean that the group of willing buyers that had been present each time the market reached that low price is exhausted.

On the other side of the range, the longer the wheat price is able to hold above the series of lows over the last two weeks, the greater the chance that those with short-sold positions are either able to purchase cash wheat to offset the trade, or are deciding to buy back (cover) their trade. A price above $6.76 December would attract lots of buying attention. The big speculative funds are reported to be holding even larger net shorts than last week, with 53,578 contracts net short-sold, the fourth largest such position in the last decade. Each time in the past when the big specs have reached this size of posi- tion, the price of wheat rose significantly within 2-4 months. 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.