CROPS

The price of wheat revealed by the Chicago markets since August/September of 2013 has been through quite a swing, starting from around $6.35 at harvest lows, moving up to $7.10 or so in October, then returning to the lows again in November. That is up and down 75 cents per bushel each way in about 2 months.

The Chicago contract is a globally watched price and a good wheat price bellwether, although in this case, Pacific Northwest white wheat traded all the way through the period without a twitch or bobble. The price in September 5th was about $7.30, on October 18th $7.30 and this week (December 3) $7.28. The market demand for soft red winter is more volatile than that of the white wheat variety primarily grown in our tri-state area, with international buyers such as China or Egypt sometimes buying and sometimes not.

The Chicago futures market is much larger than the white wheat market, so there are many sources of trade volume be- sides import/export interests. Large index trading funds and many thousands of smaller traders all over the world take an active interest in Chicago's wheat price.

Meanwhile, white wheat buyers show a reliable and steady demand, and the production acreage does not swing much, as alternative crops are limited. Most of the time, Port- land white wheat bids follow Chicago faithfully, although the range is usually less than half of the range.

The wheat market in general has little news upon which to base any large moves in either direction. The overall trend line remains lower, although there is one factor that is begin- ning to accumulate some relevance: The Commodity Futures Trading Commission's "Commitment of Traders Reports" reflect a very large accumulation of net short-sold contracts in the hands of large speculative traders.

This is a roughly trend-following category of traders whose (required) reported positions will swing back and forth between net short-sold and net long-bought totals every year. When they reach statistical extremes, like the big net short this week, it becomes clear that when they exit these positions it will be a price-moving event, as they tend to run in a herd. It does take something to spook the herd, which we really don't have right now, but the market is aware of the build-up and subsequent potential.

On the negative side balance, the Southern hemisphere crop in Australia is expanding, as they have been receiving needed moisture, so official estimates are growing, now at about 24.5 million metric tonnes, an 11% rise from last year's Aussie production. Argentina, in harvest now, has been strug- gling with rain delays, but they were not really expected to be much of a contender for export sales this season anyway.

Cold weather in the US is not a crop maker-breaker, as there is snow cover in wide areas of wheat country, protecting the winter wheat seedlings from harsh winds.

Any rallies in Chicago are likely to be very fast and violent, as funds cover short-term profitable sales, only to re-establish them again. US exports have been a bright spot all season, way ahead of USDA projections, but continuing at pace depends on largely on China. Upside looks possible, but limited. Downside probably limited for now as well, as the market has built in a very large corn crop already and many traders are wary of selling into record fund shorts.

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 op- tions, it is possible to lose more than the full value of your account. All funds com- mitted should be risk capital.