CROPS

Last week was a great week for wheat prices, even though no news had been the rule for most of the time since the first week of August. On Monday, the last trading day of September, USDA finally gave us something to look at.

There's more old-crop corn on hand on farms and in grain elevators than traders expected, according to observers of the USDA-NASS Quarterly Grain Stocks report. In published pre-report surveys, the average analyst guess for on-hand inventories of corn in the US was 688 million bushels. USDA came out with 824 million. Soybean counts also surprised many traders who had expected about 126 million bushels on hand, but USDA's number was 141 million. The immediate response of the market was to drop corn 13 cents and beans 38 cents per bushel.

The interesting thing was that wheat did not really partici- pate in the slide as it normally would. Chicago wheat was the weakest of the three major wheat prices, only down a nickel at the close, after rising early in the session to its highest point since June 24. The other two major wheat contracts, Kansas City (up 7) and Minneapolis (down 3), were also stronger than would ordinarily be expected in the light of lower corn and beans. Portland white wheat managed to stay just steady at about $7.14 per bushel through the whole episode.

The bears are running corn and soybeans, while the bulls seem to be taking charge of wheat. It is unusual for wheat to run so independently of the sister grains. The price difference between December corn and wheat futures contracts is running in the $2.40 per bushel range. Wheat is nearly always above corn, but "normal" is closer to $1.25.

Wheat contracts have been this far above corn only three brief periods in history: once in 1973/4 ($3.04 maximum), once in 2007/8 ($5.66 max) and again for a short time in the spring of 2010 (topped at $2.54). Eventually this relationship has always adjusted back to something closer to mid-range. Wheat may drop toward corn, corn may come up toward wheat, or both may move in the same direction with wheat falling more rapidly or rising more slowly than corn. Of course if they could choose, the wheat guys want to see corn come back up, but corn harvest is coming on now, so this will probably have to wait.

Meanwhile, wheat is seeing good export sales, a weaker US dollar, which makes US sources of wheat less expensive for foreign buyers, and a good chart formation with a defined new uptrend, now trading 50-60 cents above recent life-of- contract lows. The large speculative traders, holding a net 41,395 short-sold futures contracts at last report, are drawing comfort from the proximity of corn and soybean harvest. But if they decide to reverse out of their positions, that's a lot of buying power waiting in the wings.

This week's job is to observe corn and bean price behavior for additional weakness. Wheat needs to see at least a stable coarse grain market to hold onto or add to recent gains.

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