wmeubank@ocp.kcmo.com
COMMODITY RESOURCE CORPORATION
P.O. Box 8700. Incline Village, Nevada
(November 12, 1997) WHEAT: OUTLOOK–On the November crop report, the USDA raised their world wheat production estimate. In fact, they raised this statistic to a record 603 million tons, up 2.5 million from last month. Both the Russian, and Australian crops are projected to be much larger than last year's, as does our own. On the face of it, this appears quite bearish. Now, I do not want to minimize the negative connotations of this large overhanging supply, however the demand side of the equation looks fairly solid. The Chinese will have a poor crop, and this biggest of all customers could return to the world market soon. Plus, prices are not high, they are close to the lows of the past year. Bottom line, look for a trading affair as excellent demand is met by plentiful supplies.
STRATEGY–HEDGERS: We continue to recommend to farmers not to own cash wheat. This has been good advice in the recent bearish environment. With stored grain, your risk is not predetermined, plus there are opportunity costs lost. Rather, maintain ownership of wheat on paper using call options. Farmers who did this relaxed during the recent price weakness, since their downside risk is strictly limited.
TRADERS: After accepting a 30¢/bushel profit on our last closed-out trade, we maintain a sidelines approach. There does not appear to be a great trade in terms of reward to risk in the wheat market at this time (the beans are more exciting).
George Kleinman
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One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com