CROPS

Tuesday marked the 12th trading day during which the December wheat price in Chicago worked to lower levels: a 50-cent decline, which surrendered pretty much all of the upward gains from the mid-September/mid- October rally.

Even in its weakness, the pattern still allows the concept of a larger up-trend line, as the price would have to reach and confirm below $6.35 (21 cents below Tuesday's close) per bushel to negate the new positive slope created when the price poked above seven dollars in October. Current wheat owners that have sweated out the recent decline must hang their hats on the expectation of a "new, higher low" than the previous low, followed by a breakout above the previous high. That is the definition of a large new uptrend and could take enough time to develop to include southern hemisphere production effects.

Wheat prices had been enjoying the benefit of a very small corn crop in 2012, which caused more wheat to be fed as a replacement for corn rations to animals, and pushed the wheat-over-corn price differential to reach historic highs above $2.50 per bushel at the end of October. Now that corn harvest in the US is over 90% completed with better-than- expected yields, that spread is bound to come down to earth.

Wheat prices had been sustained by the supportive idea that good year-to-date wheat export numbers would soften the blow of losing the big feed demand, but that has not been enough to hold December contracts over seven dol- lars. Global demand for quality wheat, for which US wheat is known, remains strong, even as US wheat sellers are too high-priced to compete in large sectors of the global mar- ket. India is turning into a very aggressive wheat seller, as they have to work off a very large surplus in storage. With their recently announced $40 per metric tonne (68 cents per bushel) price reduction, they are even below wheat offered from the Black Sea region. It is a buyer's market.

The futures market is aware of the above issues and has already built in its best collective estimate of their effects. The present price will be sensitive to adjusted USDA data, with a key post-shutdown report being due out this Friday morning. The trade will be very focused on the release of production figures for corn and soybeans, widely expected to be expanding from previous estimates. We have seen some kind of surprise out of the USDA statistics virtually every report this season, so the nerves are tight.

Meanwhile, the trade is still active. After some missed reports from the Commodity Futures Trading Commission (CFTC), new data shows Commercial firms as a category have reduced their very large net long (purchased) positions, as usual accompanied by a price increase. The Large Specu- lative entities have covered big short sales and now are near to net even. If the Commercials continue to add net short- sales as the funds add to longs, we have the necessaries for an up-move. The short-term trend is still lower, but almost mature. The big picture is still positive, but less exciting that it might have been a month ago. Next move seems likely to be a bounce-back from lows, but watch out for USDA surprises. Information and opinions contained herein come from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds com- mitted should be risk capital.