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Veteran Advisor

ok chicago....just what do you want ??

well you are killing the wheat market....down 8 tonight....

 

have a noted anylis saying we don't need another crop......can't see why anyone would plant wheat...

 

prices in some places approching $2.50 a bu....we are below cost of production........

 

do you really know what you are doing ???

 

are you prepaired to drive everyone out of the wheat market.....then find you are out of wheat in the united

 

states next summer....and have to import "junk" from over seas.........

 

wonder how it will taste....from those places that are not as careful as we are....

 

understand it will take then another year to have a crop..........

 

you will not be able to get fresh wheat at any price....paying higher prices does not make a product available, it

 

it has to be grown...it takes time.

 

perhaps you should talk to some of your people in europe....you have never had a food shortage in chicago, you

 

have been blessed....in europe, they remember food shortages and thusly they gladly pay more, to make sure

 

food will be available.......

 

there is a old saying....be carefull for what you wish.....you might get it.......you wish that nobody plants wheat......

 

with these prices.....you will get your wish.....but down the road.....enjoy the bug infested, unlabeled pesticide

 

applied to, wheat imported to make your bread....buns....cakes....and other products made with wheat........

 

enjoy it.......it's what YOU wanted.

 

 

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Honored Advisor

Re: ok chicago....just what do you want ??

I don`t know much about wheat production, but if your machinery is there, the land is there, won`t basically what will happen is they`ll take a couple bushel of bin run seed @ $5/acre, forgo P & K , maybe a dab of N, with 2,4 D for herbicide.  Forgetting all about the "Hefty brothers" tramlines and extensive fungicide and other fancy-dancey foliar applications and nitrogen streaming.  The money ain`t there, the land will have to give what it gives like it did to grandpa in 1947.  If you have a gross return of $75/acre under those conditions, that is your pool of money to divy up to balance the books. 

 

All that may come to corn production in the "I" states too, the heck of it is, some probably have such high fixed costs that it loses less to produce...we have a real tiger by the tail.

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Advisor

Re: ok chicago....just what do you want ??

Wheat quality appears to be an issue around the globe.

 

That's more bad news for corn but offers some hope for wheat, in relative terms, later in the season as the market needs to buy milling quality and something probably creates some concern somewhere.

 

I've had a long term chart objective of 3.72 in nearby wheat- several times along the way I thought it wouldn't get there but we're now there.

 

Somewhere down there, if it happens, I'm going to put an option position on in some far deferreds.

Probably sell a nearby call to buy 3 OTMs. Given the carry in the market the first possiblity is that they all expire OTM and I'm out some commissions. #2 is a loss if it expires beteen the two. #3 is we get a move of a buck or more and I have a lot of leverage.

 

I'd say those are about the order of probablity, too, but is is a matter of convexity- more leverage to the upside than risk to the down.

 

Of course the general tendency of markets with these kinds of big carries is just to keep decaying it into each successive contract.

 

PS: trying to sell 1 4.20 for 3 4.80s. I don't expect to see any immediate gratification on that.

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