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Wheat prices contnue a traceback

Wheat has been the 'golden child' of the grain markets the past 12 months,
with the pinnacle in February when HRS wheat futures hit $25 for a high.
This was quite an achievement, and has pretty much put the frosting on the
wheat cake for this year, and perhaps even for decades. Cash HRS wheat
prices are now worth less than half of what they garnered just 2 months ago
- a remarkable change in a short period of time.

Wheat prices have dropped steadily since then, taking new crop Chicago wheat
down below the $8.50 level after tipping the $13 level earlier. This is a
huge price move for wheat growers, and one that at this point looks like an
opportunity wasted. Not only have 2008 wheat prices dropped solidly, but
2009 and 2010 have dropped hard as well from previously dramatically high
levels.

While wheat has become the ugly sister after its two month metamorphosis,
one has to start looking at the corn market with its current $6+ price level
as being vulnerable. Of course, we all know corn planting is lethargically
behind normal, with progress at a terribly slow pace for now. In fact,
weather forecasts haven't changed while corn prices have hovered for the
past few weeks. The volatility is there, but so far corn doesn't appear to
have any technical appearance of topping.

With wheat prices clearly retreating
from previous highs, wheat is starting to become priced as a feed grain - a
dangerous development for corn. Corn growers can start to get nervous when
they see the $5 break in wheat prices to the point where it might start
entering feed rations again. Corn fundamentals look impossibly bullish for
now, but as all grain traders are aware - things are always the most bullish
at the top.

Soybeans may be the sleeper here, with weekly technicals showing two upside
weekly reversals in the last 4 weeks (one on the week of March 30 acreage
report - a very bearish report which gave us a unusual weekly upside
reversal). The most recent upside reversal was last week, when wheat prices
took a tumulus turn lower. It used to be that a grain was a grain was a
grain, and all grains moved the same direction. That is clearly no longer
the case. Corn prices are bidding at $100-$200/acre profit price advantage
over wheat or soybeans, a development that has occurred since the March 30
report. It's likely to attract more acres, but only the weather can provide
the final answer to how many more acres.

So if you are a producer of corn or wheat, perhaps you should be afraid,
very afraid, of the recent market developments. But, what about a soybean grower?
While wheat has become the ugly sister in the grain marketplace, soybeans
may be the ugly duckling this spring that could turn into the beautiful swan
by next harvest! Today, corn might be the best sale on the grain planet,
and perhaps an opportunity that we should not let pass us by?

The information contained, while not guaranteed as to accuracy or
completeness, has been obtained from sources we believe to be reliable. The
opinions and recommendations contained are based on our judgement and do not
guarantee profits will be achieved or that losses will not be incurred.
Recommendations should not be construed as an offer to buy or sell
commodities. There is substantial risk of loss in trading futures and
options on futures.

Ray Grabanski is President of Progressive Ag, a marketing and risk
management firm for farmers located in Fargo, ND. For questions or
comments, or if you are interested in more information about Progressive Ag
services, call 1-800-450-1404.

Wheat has been the 'golden child' of the grain markets the past 12 months, with the pinnacle in February when HRS wheat futures hit $25 for a high. This was quite an achievement, and has pretty much put the frosting on the wheat cake for this year, and perhaps even for decades. Cash HRS wheat prices are now worth less than half of what they garnered just 2 months ago - a remarkable change in a short period of time.

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