The Times - Serving Waitsburg, Dayton and the Touchet Valley

A nyone hoping last week for lower wheat prices re- ceived a nice gift in the form of a two-day, 70 cent de- cline in Chicago May futures across the Good Friday long weekend. Portland white wheat traders responded with a 50-cent drop in the same time.

The trigger for such drama came from a USDA quarterly Grain Stocks inventory report and survey-based Planting Intentions report last Thursday that surprised the trade with much larger stocks of corn in storage than most professional observers had expected. Also, the largest intended acreage of corn in the US since 1936 was seen, although the trade had that figure about right going in.

Wheat stocks also were reported higher than pre-report guesses, as were intended spring wheat plantings. So much for consensus opinions ahead of statistical reports! Wheat has followed corn downward because feeding of wheat to animals has been a significant source of demand in the last year, so the idea of more corn available than expected is nega- tive for wheat.

When the wheat market hits such an air-pocket, especially toward the end of a months-long decline, it takes a while for the trade to digest and rationalize the new lows. It is a nice set- up for a weather-related, seasonal rally, although the hopes that some had pinned on Midwestern drought conditions for higher wheat prices have dimmed as moisture has crept steadily into the dry regions over the last two months. Still, there are dark spots on the USDA's Drought Monitor map from Western Kansas up through South Dakota, centered in Nebraska (see http://droughtmonitor.unl.edu/). It is spring, when weather always plays an expanded role, but at present just not a large enough factor on which to hang your hat (or your money).

The decline in grain and wheat prices will help stimulate some buyer enthusiasm, but it is more about how the demand pie is sliced rather than the size of the pie.

Except for adjusting to new chart lows dating back to last June, the wheat futures market has no extra-special problem to solve at the moment. The end of a downward trend of such a magnitude is never a quick process, and the end of one big move does not mandate a strong push back to the upside in the short run, but at least the negative factors are mostly already known, so the futures market must focus on unknown risks coming up in early summer. The price trend is still lower, although much of the downside risk has been "drained" from wheat prices over the last 10 months of trade, which, absent the emergence of new factors, allows a better chance for positive sloping trends.

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.