CROPS

There is no market of any stripe that is not watching events in Washington, D.C. with a kind of horrible fascination. It is like watching a horror film, knowing that the chainsaw killer is in the next room, and bad things are going to happen, while secretly relying on the author to rescue the heroine just in time.

The problem is that there is no way to know if the script will kill her off and leave her boyfriend sobbing and alone at the end, or if both will prevail and ride off into the sunrise to- gether as the monster (apparently) dies in the burning house. Too bad if you want your money back. You'll just have to watch this movie to the end.

The price of wheat, although showing its first upward trend line since April, lacks a mandate for extension of the recent 50-cent gain in Chicago. Looking around for a clue, corn harvest is thought to be about 30% completed, although there are no official weekly USDA Progress Reports to help calibrate trade. There seems to be little cash corn moving out of farmer hands to terminals yet.

This is no surprise, as the psychology of selling near the 3-year lows ($4.32 for December corn contracts on Monday) is hardly compelling. This has helped to keep the pressure off of soft red wheat prices, as animal feeders have not received the flow of corn back into the market that is expected to re- duce demand for wheat as feed. The difference of wheat over corn prices is very high at present, over $2.40 per bushel, historically rare versus a more normal $1.00-$1.50. Only three times since the late 60's has wheat been so high relative to corn. Corn normally sees seasonal lows this time of year, but there is a political component this time, as the EPA is considering a reduction in the ethanol/gasoline "Renewable Fuels" mandate, which threatens to cut demand for corn as a fuel alcohol feedstock, a price negative. The high wheat/corn spread is not a positive factor for wheat prices, and potentially a drag on further wheat price increases if corn cannot find a base level.

Relying on the Chicago December wheat price charts for guidance, Tuesday's closing price was $6.85¾. A close or two below $6.82 would strongly suggest a move back to the center of the September-October range, another 20 cents per bushel lower still around $6.60. Kansas City hard red winter wheat has a better looking chart, but has the same vulnerabil- ity on a failure of $7.50 back to the $7.26-$7.35 level, while hard red spring wheat must hold above $7.45 or risk back to $7.28 to $7.35. The upper end of expectations for Chicago wheat is around $7.25, 40 cents per bushel above Tuesday's close. White wheat in Portland is very quietly trading in the $7.20's.

When (not if) there is any kind of resolution to the national congressional/executive brawl, all markets are likely to jump about excitedly for a bit, if for no other reason than relief. If corn manages to jump up, wheat may jump as well, but any such jump to new highs should probably be viewed as a time to seek selling points, as present global wheat mar- ket fundamentals do not sug- gest major bull market moves this winter.

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.