Commodity Trader's Almanac 2O11

EAT YOUR WINTER WHEATIES

The wheat market has posted a tradable low in

early December the past 23 years, since the effects

of the big grain boom/bust cycle of the 1970s and

1980s wore off in 1987. We have included the

trade results since 1970 to illustrate the impact of

the overarching cycles on seasonality.

This commodity has a strong seasonal pattern

(page 164), and in recent years we have seen

unprecedented price gains. In fact, in February

2008 this market marked a record high of over

$13.49 per bushel. This was an incredible move,

partly due to what was suspected to be a

speculative run on commodities from investors

rather than a supply and demand imbalance.

CBOT wheat is considered winter wheat, as it is

seeded in the September-October time frame and

during the winter, it enters its dormancy period.

Southern Hemisphere supply puts pressure on prices

into early December until the size and health of the

newly planted Northern Hemisphere winter wheat

crop is known, creating a seasonal peak in January.

Over the past 40 years, this trade has a 60.0%

winning percentage with total gains of $6,862 per

contract. But since 1987, this trade has produced

gains in 18 of the last 23 years, for a 78.2% success

rate and total gains of $12,463 per contract. Enter

long positions on the May contract on or about

December 7, and exit about 20 days later, when our

January short wheat trade commences (page 18).

The chart ...