Wheat: Lets Have A Look Outside The Box

EU wheat futures are modestly lower in quiet trade Thursday. With American markets shut today and only trading a shortened session tomorrow, I guess it was always going to be that way.

Paris March milling wheat is down EUR0.75 at EUR136.25/tonne, and London May feed wheat is GBP0.70 lower at GBP100.00/tonne.

The global economic slump is there for all to see, and that is what's in the driving seat at the moment. Indeed, that is largely ALL that people can see.

Strange however, that the same people who were telling us six months ago that crude, metals, grains and everything else were on a one-way trip into the stratosphere are now the very ones saying the opposite.

Maybe we need to look outside the box a bit here?

World wheat stocks have been replenished. But they needed replenishing. Still, they are hardly burdensome, we had higher world ending stocks than currently projected as recently as 2002/03.

Some analysts are raising concerns of sharply lower output next season as farmers scale back both plantings and fertiliser applications, with wheat prices running at or below production costs.

Additionally, it seems unlikely that Mother Nature will be as kind the world over next year as she pretty much was this time round.

Chuck some unfavourable weather into the mix and world production numbers could be a lot lower in 2009.

And the population is still increasing, demand is still going up. We aren't talking about steel & concrete to build a bloody Olympic village here. We're talking food. The stuff people were dying fighting in bread queues over not that many months ago. It's not something we can do without.

The wave of overwhelming nearby bearishness, has stopped people looking ahead to the possible bullish factors that could be in place a year from now.

Twelve months ago all the clues were there too. Everybody knew that plantings were going to go through the roof as farmers the world over jumped on the gravy train.

Like my old mentor at Bunge once said: "When everyone's a buyer, let them have it. When everyone's a seller, take it off their hands."

Wise words indeed.