CROPS

When seasonal lows are expected, when the trend has been flat-to-downward for a year and winter wheat harvest in the US is effectively complete, these are the times that try men's patience (with apologies to both Thomas Paine and the women whose pa- tience is also tried).

The wheat market has been unable to identify a low point. Each new attempt to rally wheat futures in Chicago since the lows of mid-June has produced only a lower high than the previous attempt, along with a lower low following, the classic definition of a negative trend.

On Monday, Chicago wheat dropped to a new low, most likely in the light of pretty good growing conditions for corn and soybeans in the US and a relatively smooth winter wheat harvest now working into South Dakota.

US wheat offerings in the export market have been too expensive for Egypt and Bangladesh in recent tenders, al- though overall US export sales have been a little ahead of USDA projections. It is normal for global wheat shoppers to accelerate buying at new crop time on the expectation for seasonal lows, but business-as-usual is not a recipe for trend- changing price increases.

Anticipating harvest lows can be exasperating, but the risk of owning wheat is 50 cents per bushel lower than it was in March, and $2.00 per bushel lower than it was a year ago. Wheat importers and end-users feel no particular urge to rush buying programs right now.

The chart-based potential for lower Chicago prices is fairly well-defined at just over the $6.00 level, about 50 cents below present markets and the top-end of the same basic price zone that dominated the nine months between mid-September 2011 and mid-June 2012, the lowest range period of the last three years.There is no argument to sup- port rationing of wheat supplies, so the bias remains lower, with corn and bean crop development and early harvest the dominant factors.

Once the lows are better defined (and they will be defined soon), standard retracements based on the "golden ratio" commonly applied by many market watchers imply a return trip upward of a dollar per bushel or more.

The problem always being that in order to measure a re- tracement, we must have a defined low with which to start, i.e. at least a chart pattern with a low point followed by a higher low point followed by an upward break-out. A little fundamental supply/demand story featuring a reason to buy would be nice to go along with this pattern, but that is a lot to ask in the current environment.

With Japan back in the white wheat market, Pacific Northwest wheat will stand a fair chance of re-capturing some price strength if Chicago, Kansas City and Minneapolis futures are able to define themselves better in the next few weeks.

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 trad- ing futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital.