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COMMODITY RESOURCE CORPORATION
P.O. Box 8700, Incline Village, Nevada
(August 14, 1997) WHEAT: OUTLOOK–The USDA Crop report was bearish. The increase in their production estimate, over 70 million bushels from the last report, is the largest increase I've seen. If they are correct, this could put a halt to the developing bull market in wheat; we will have to see. The real question is, will poorer crops in Argentina, Canada, Australia, and maybe China as well, be bullish enough to offset the bearish U.S. numbers? I am not yet ready to take the bull out of the wheat box. We will raise the caution flag, however, and now attempt to let the market tell us if it believes the crop is as large as the government does.
STRATEGY–HEDGERS: Our strategy now makes more sense than ever. Readers know we recommend selling all your cash wheat, yet maintaining ownership for higher profits with the purchase of December at the money call options. We were previously able to buy December Chicago 340's and 350's at 15¢. Option premiums have gone up, but are now falling again. This strategy limits your downside risk, something you cannot do by holding cash wheat [a negative asset] or long futures.
TRADERS: Continue to hold the Minneapolis December futures, first recommended for purchase in the 352 to 356 range. Raise the risk point to a close under 380 to lock in some profits. Continue to leave the upside objective open at this time.
George Kleinman
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