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Funds flood the open interest on wheat markets

[Dow Jones] - Total open interest Friday at the three U.S. wheat exchanges
totals about 500,000 contracts, or 2.5 billion bushels, exceeding the size of
the U.S. total wheat crop, notes Bill Nelson, a grain analyst at AG Edwards.

"Even a million corn contracts is 5 billion bushels, or less than half the corn
crop," he said. "Perhaps there is some precedence for total open interest to
exceed production of a crop, but we can't recall when or what that was. For
trading purposes, our take is that the expanding open interest in the long
commercial accounts has supported crop prices above levels that during previous
recent years would have resulted in lower futures prices."

Nelson said that by
comparison, CBOT wheat open interest was between 10,000 and 20,000 contracts in
the early '70s.

"It is blowing off the top of the linear scale chart," Nelson
says. "This development is consistent with the dramatic expansion of the
so-called commodity index funds and their long-only buying. While one might
think that these firms would be classified as large non-commercials, they are
categorized by the CFTC as commercials, by and large."

[Dow Jones] - Total open interest Friday at the three U.S. wheat exchanges totals about 500,000 contracts, or 2.5 billion bushels, exceeding the size of the U.S. total wheat crop, notes Bill Nelson, a grain analyst at AG Edwards.

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