CROPS

Wheat markets have a language. For the wheat owner right now, the decision to hold wheat in storage or sell it before year-end has many facets, like taxes, interest costs, bills due and so on, but sometimes the market's voice tells us that selling and then paying to hold wheat in storage may make sense. It might even pay a little interest, if the market price structure includes a "carry", that is when prices for contacted delivery in later months are higher than prices for nearby dates.

This week, Portland white wheat bids are higher for January delivery ($7.24) than for December ($7.14), about 10 cents. Most commercial or co-op elevators charge for storage of wheat in their bins, usually around 2-3 cents per bushel per month, but sometimes quite a bit more, depending on the location. For someone who intends to convert their physical wheat into cash soon, it makes sense to sell wheat for future dates and pay to hold the stuff in storage until later delivery if the cost of storage is less than the gain in deferred contract price.

All of this is the market's way of saying, "Hold on for a minute, I don't need your wheat as much now as I will later, so I will pay you something to wait." Watching for changes in the difference between price bids for various delivery periods is a great way to measure what the market is actually doing about slowing or speeding up supply. This is as true for any other physical commodity as it is for wheat.

Chicago wheat prices for later physical delivery, reflected in futures quotes for December and March, reflect only seven cents carry for the whole 90-plus days in between, a much smaller gain for holding soft red wheat, probably not enough for anyone to justify selling for a later delivery and holding wheat in storage. That market is whispering that demand is about as strong for near delivery dates as for later, so "I am not interested in delaying your wheat sale, you might as well sell and deliver now."

The pattern for wheat prices based on Chicago futures is negative, and the last two weeks trading have not yielded much for trend indications. The wheat charts for all three of the major wheat futures markets show that prices are near levels where active buyers most recently emerged in August and September. A failure to hold above these previously sup- portive price levels, around $6.47 in Chicago soft red wheat March futures, $6.97 Minneapolis spring wheat and $6.85 for Kansas City hard red winter, would be a confirmation of continued downward price pressure. Meanwhile, it would be entirely within the range of normal market behavior for Chicago wheat to hold above and rally upward from such historically significant lows against the trend for a while. The character of such an attempt will be a useful test of market strength.

The wheat market is not struggling for supply right now. Winter weather is on the news, but that is a weak factor at best. Steady is the call, but watch for icebergs.

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.