CROPS

I f we could first know where we are, and whither we are tending, we could then better judge what to do, and how to do it. - Abraham Lincoln, June 16, 1858

To ignore a trend is to step into the path of a stampeding herd of steamrollers. The only practical tasks for anyone who wishes not to be rolled out like a piece of dough are to study the environment to be aware of trends, then to make duly educated judgments and thoughtful actions followed by ad- justments and alternates. Every trend has its end. It remains for us to manage when.

As of the close of business Tuesday, Chicago wheat futures had completed a 4-day, 20-cent move up from the previous week's low, reacting to a 10-day decline into recent lows, but the energy character of the move was sloppy and weak. It will take some greater enthusiasm from the buyers to change the definition of the trend from negative to positive, like a couple of decisive closes above $6.67 per bushel in December futures, some 25-30 cents above current.

Until that event, there is no strong mandate to expect anything except more of the same lower process. The last 12 months' trading have established a pattern of declining prices with a roughly 75-cent swing between intermediate highs and lows. The lowest target for chart-watchers today remains just above $6.05 for September futures (expiring in a couple of weeks) or around $6.15 for December. For white wheat prices in Portland, this implies something like the $7-teens.

With that said, there are two bits of salt to add to projec- tions or forecasts of the future price of anything: It is always possible to project another 30-50 cents on an established trend line no matter how extreme things become, and the identification of a low (or a high) is not a mandate for an im- mediate strong move in the opposite direction. It may take 30 days or more once the much anticipated seasonal/harvest lows are in for this market to discover reasons to move back upward. Lurking in the background are the commercial firms reporting heavy net long (purchased) positions, always a harbinger of stronger prices ahead, but sometimes a slow- moving indicator.

A normal retracement of the pattern of the last year suggests the potential for one dollar or more above present wheat price levels, but with a potential time window of at least six months. Many things may come to bear in such a time period, including the southern hemisphere crops in Australia and Argentina and even early crop condition reports from the Southern US. Meanwhile, storing wheat in hopes of captur- ing better prices is a very expensive way to speculate, and it carries lots of market risk.

The wheat market is about a miserable as it gets, from the producer point of view, but soybeans and corn have enjoyed a nice run-up with 45 cents up for corn prices and $1.30 for beans over the last ten sessions, although the idea of a new upward-trending market is not well supported by the fun- damentals. China had been buying US grains this year at a more than average pace, but at this point, US stuff is pricey compared to other sources, so the buying is likely to ease off. Crop conditions in the US corn and bean belt are good: 61% good-to-excellent for corn and 62% GTE for beans.

Ready to be a buyer, but it is clear that the wheat market is not finished with the down- trend yet.

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.