01-20-2008: March Chicago Wheat: Malthusian Theory Updated for Global Warming
Thomas Robert Malthus (1766-1834) believed that population would increase at a geometric rate and food supply at an arithmetic rate. This would lead to widespread poverty and starvation. Malthusian population theory was eventually dismissed for its pessimism and failure to take account technological advances in agriculture and food production. In biology, the theory assets that the reproductive potential of virtually any organism greatly exceeds the earth's capacity to support all its possible offspring. Consequently, species diversity is preserved through mechanisms that keep population in check, such as predation and genocide.
For humans with their technological development, the arrival of the Malthusian confrontation may have been delayed, but it is too early to count it out completely. For just as Malthus failed to take account of technological advances, many scoffers and denialists today have failed to take account of global warming. Al Gore was right. The only problem is that he may have been a little too conservative in his assertions regarding the timetable or calendar of catastrophic events. Global warming is already upon us, and its effects can be seen worldwide. The price of wheat is only one example.
Some commodities analysts claim farmers are responding to the high price of wheat, increasing wheat acreage, and prices will now fall by next year. While this may be true, the view is narrowed to a purely economic one. The acreage will come from other crops... which crops?... as the price of most grains has also risen in tandem with wheat. Such analysis needs to include a worldwide scope to see the true picture of what is happening to wheat. It is not just a failure of farmers to devote enough acreage to wheat. It is a consequence of global warming! And that isn't going to go away any time soon.
March Chicago Wheat:
March Chicago Wheat:
155.0I T 1/18
I CBT - Mar-08 Chicago Wheat, 5000 bu., c/bu. Cm.=0.60 Lim.=33.0
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115.0I_________________________________________________________________________
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75.0I_________________________________________________________________________
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35.0I_________________________________________________________________________
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995.0I__________________X______________________________________________________
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955.0I____XO____________XOXO____X______________________________________________
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915.0IX___X__O________XO___OXOXOX______________________________________________
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875.0IXOXOX__OXOXO__XOX________________________________________________________
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835.0IX________O_O__X__________________________________________________________
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795.0IX__________OXOX__________________________________________________________
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755.0I_________________________________________________________________________
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715.0I_________________________________________________________________________
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675.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
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The above point-and-figure chart is giving a conventional buy signal.
We are headed toward a cyclical low and a seasonal up period.
Our best-performing internal program is "Thrust." It is giving a buy signal.
Results of "Thrust" for Chicago Wheat (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system has just triggered a buy signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $50. Initial margin on a single contract is $2,227.50. Use of options is advised.
Scale trade sellers are entering the market for the long term in this price range.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Red is small speculators. Green is large speculators. Blue is commercials. Large speculators with the best track record are getting increasingly-long.
The average volatility shown below suggests that the last major change at a volatility low point in market direction to up remains intact.
Our option trade recommendation is to Sell the Chicago Wheat May 970 Put @ 69 or better.
Here's an intraday chart for the previous day ( 1/18 ).
Risk Versus Opportunity Report
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WH8 Chicago Wheat
High Price: 1080
Current Price: 962
Low Price: 905
Risk: 0.115
Opportunity: 0.238
(O/R) Ratio = 2.070
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | + 1 |
| Nirvana Chart | + 1 |
| News | + 1 |
| Point & Figure | + 1 |
| Cyclicals | - 1 |
| Seasonals | + 1 |
| Internal System 1 | + 1 |
| Internal System 2 | 0 |
| Third System | + 1 |
| Commitment of Traders | + 1 |
| Historic Range | - 1 |
| Range/Volatility | + 1 |
| Level Table | + 1 |
| Other Factors | + 1 |
| Total | + 9 |
Place 8 March Chicago Wheat on a Buy Watch with stoploss @ -32-1/4 below the get-in point.________________________________________________________________________________________________________W.G.
