Friday, August 31, 2007

Wheat Up Big - Again!

Check out this 6-month chart:

Though unfortunately I am not basking in the full glow of this rally, because I own next year's contracts.

Why are contracts lower for next year? I believe because record high prices will prompt farmers next spring to plant more wheat - which should bring more supply on the market and drive down prices.

However that begs the question - where is this extra land going to come from? Farmers are currently planting corn from coast to coast at the expense of crops such as wheat - so that balance should swing back in wheat's favor next year.

Soybeans and cotton are the other two crops that often share land with wheat and corn - so keep an eye on these two. Soybean prices are relatively high, but cotton prices remain cheap - and perhaps part of this thinking is fueling the current rally in cotton.

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