Anyone still holding onto corn either has no debt or they have no idea how to market grain.

Since harvest of 2009 corn has never been above breakeven.By the time you pay drying ,damage and storage your on the losing end.

Maybe the wheat traders saw the news about an ETF cornering the cocoa market and are trying to do the same thing! They already own the entire projected US carryout, with over 40% of the open interest. The part that is surprising me is that the US dollar seems to be finding a bottom, taking away that excuse. Maybe somebody has a some inside information on Russia? Never argue with the markets. I tried to go short again on Tuesday and we are running a triple top in MPLS Dec right now, so I am going to take my loss and stand aside.

Thanks for the comment. Here's another tidbit from Dow Jones this morning: the wire service reported that Rabobank has raised its forecast for global wheat prices in the next 12 month to $5-$6 from $4.50 to $5.50 a bu. and is now expecting CBOT wheat futures to average $5.50 in the 4th quarter, $5.40 this quarter.

This wheat market is bogus,Every elevator and terminal around here are full of wheat and no home for it.If the traders had to buy and take delivery of this stuff we would not have these big swings in prices.

Every elevator around here? The wheat is all # 1 quality? The wheat market is not bogus. It is trying to tell you something all you have to do is listen. If it weren't for traders you would not have a functioning hedgeable market that farmers depend on. As a long time farmer and former commodity broker my advice is take advantage of what a market gives you even if you think it is bogus, hedge it, but don't "fight the tape"! Jim Davis

Why don't we just farm paper?

Good discussion on the wheat market. Mr. Davis has a solid point about listening to the market. The noncommercial side is convinced wheat is bullish so it has the marekt on the run. Look at the deferred contracts, particularly new-crop July 2011 and 2012, and you see these issues trading in the upper reaches of price distribution range. If we also listen to the commercial side of the market through the futures spreads and basis markets, we know that the underlying fundamentals away from the headlines remain bearish. Putting the two together, as Mr. Davis stated, one could look to take advantage of the rally the market has seen. For more information on this structural divergence, take a look at the DTN Wheat Strategy. I'm also going to make another attempt at discussing "Broken Markets" in this week's On the Market column.

It's been my experience that China gets what they want, and this rumour might be a sort of signal that China will get the corn on their own terms. Of course in Asia, that could mean almost anything. Its pretty hard to tell what's going on there. However, I'm hoping this is just rumour and doesn't become fact.

The Hard Spring Wheat Index is about even with the Soft Winter Wheat Index. Will commercial buyers eventually pay a premium for soft wheat? Have the high contangos at the CBOT really taken all the soft wheat off the market and put it into storage, or are there other factors?

Great observation, Mr. Farley! Let's see what we can turn up on this one.

The Variable Storage Rate instituted w/ the July SRW contract and the resulting wide(r) contangoes is largely largely responsible for the relative high basis is SRW, in my opinion. There's simply too much incentive for anybody with storage capacity to store well into the future as the wide board carry incents it, so basis has to bid up nearby to coax it out of space and into market channels. Bear in mind the CFTC is holding a meeting Aug 5 to 'review' convergence in SRW post-VSR and plan to look at HRW too. My prediction: VSR is coming for HRW by July '11 w/ similar results as SRW.

Ken is correct. The VSR policy put in place in SRW has skewed the market, forcing basis higher while pushing the carry to near record levels (based on a continuous monthly chart of closes only, nearby Chicago SRW spread traded at a 32 1/2 cent carry in November 1980 in reaction to the U.S. grain embargo of the FSU). And yes, this same action is probably on the horizon for HRW as those in charge see it as a cure for the historically weak basis. But remember, there is a difference between curing the symptoms and curing the disease. If left alone, the disease will still kill, and that is the situation the wheat markets face with VSR. In regard to Thomas' question, the SRW basis market has been artificially inflated. And while it is possible that the HRS index falls below the SRW index -- it has happened before, as recently as September 2007 -- I'm not sure that this acccurately represents the underlying fundamentals of the two markets. Keep in mind that winter wheat acres decreased from last year, tightening projected SRW ending stocks to use to "only" 44 percent while spring wheat acres were increased resulting in a projected ending stocks to use of 66 percent. Great questions and comments regarding a market (wheat) that is indeed facing a litany of issues.

I'd add that most of the 'problems' in the global wheat regions (Russia,Canada, Kazakh) today are in the mid/high protein wheats, not the low pro SRW. SRW is a premium to HRW in the U.S. gulf export and at current premiums to corn, it's certainly not going to figure into many feed rations. What does it all mean? Out-of-whack relative values eventually correct themselves ... so too will this one. FWIW, I've had more questions from my subscribers about 2011 wheat prices and outlook than anything else ... similar to the queries I got in 2008 .

Darin forgot Sumitomo's copper foray in the 90's.

I don't share Darin's notion we'll see increased involvement of hedge funds and ETF's involved in physical delivery , at least not in U.S. markets. For one, ETF's report their U.S. futures and options activities to the CFTC under the category of swap dealers. To be qualified as a swap dealer, the CFTC mandates they may not hold futures contracts once they enter the delivery period. The two largest comodity indexes ( GSCI & DJ-AIG) have as part of their charter that they roll nearby (expiring futures) nearly 30 days in advance of the delivery period. Hedge funds (professional speculators) also have strict limits on nearby futures, limited to a max of 600 contracts in grains and oilseeds. For market historians & those of us old enough to remember will recall that more strict limits in futures on the CBOT and Comex were a result and response to the Hunt silver deal. On January 7, 1980 the exchnages and CFTC set limits to a max of 10 million ounces of futures effective Feb 1980. The Hunt's at the time held futures well in excess of that limit and thus it forced liquidation soon after. Non-U.S. futures and physical delivery markets simply are not as advanced as the U.S. in terms of transparency and strict position limits. If we see anything as a result of the recent cocoa market experience, I expect it will be tighter limits and increased transparency in London markets.