CROPS

On September 16, the Chicago December wheat contract price began a move up from seasonally expected lows. Over the next 26 sessions, 70 cents were added to the price of soft red winter wheat to be delivered in De- cember to Chicago/Toledo locations.

Global wheat traders took note of the change in direction for this "most-watched" market, the first significantly measureable upward move since July 2012. The change in behavior awakened hopes for a new major price trip upward, but the road has been muddy and slow for the last week or so.

We are now trading about 30 cents below the highest point reached in the new positive effort: around $6.82 as of Tuesday. The market is hunting reasons for more upside, but fighting the favorable global wheat production weather and a past-halfway corn harvest that has revealed better-than- expected yields even with rain delays.

As a reduced ethanol mandate is apparently to be applied to US gasoline formulas, corn is facing reduced demand and increased supply, a recipe for flat price action at best. (Most of this factor has already been anticipated). The corn price chart has a steadily lower slope.

Wheat prices, which had enjoyed solid supportive demand last year from consumption as feed, must find another reason to rally. A slightly weaker US dollar is supporting increased export demand, much greater this season than last year, with China and Brazil leading the way to the highest total wheat exports for the crop-year to date in ten years.

Put all the above in a pot, stir and simmer. The stew may not be pretty, but it will feed the market enough to quiet the growling until full-on winter. The global market is relaxed at the moment, with reasonable supplies available.

If there is to be a greater uptrend extension in Chicago, it will probably be technical in nature - more about money movement than it is about fundamental production or con- sumption. The upside target without a new story is still just over $7.10 per bushel for Chicago, implying a 15-20 cent upward potential for Portland white wheat if Chicago can sustain the level.

The end of a long, 14-month downward move in most markets does not come all at once. The breaking of a down trend line signals a new phase is at hand, but in order to main- tain a healthy balance between buyers and sellers, a period of "consolidation," in which prices work back and forth in a range to confirm the low and the presence of buying interests, is to be expected.

As global wheat buyers work their way through the cheap stuff from various northern hemisphere sources (India, Ukraine, European Unionhellip;), U.S. wheat becomes more prominent later in the year, at which point the southern hemi- sphere production (Australia, Argentina) becomes the big deal. There is a little window in the middle that may allow a demand story to continue to develop.

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