Wow, what a week. The feature was wheat, soaring to an 11-year high on worries that the size of the U.S. hard red winter wheat crop was shrinking due to relentless rains in the southern Plains, and a government forecast for global wheat stocks to reach a 30-year low by the end of the 2007/08 marketing year. It was so crazy that the premium for wheat relative to corn stretched above $2 per bushel — a rare phenomenon.
    “It’s just gone absolutely bananas. It went to $2 and there’s only been five times in history it’s been there,” said analyst Roy Huckabay with The Linn Group in Chicago.
    Next week will surely bring more volatility. If it stops raining in the southern Plains and farmers are able to resume the harvest, wheat could see a downward correction.
    If it stays wet, anything is possible, with some analysts thinking the price of Chicago wheat could take a run at $7.50 — the all-time high.
    “There’s not any reason for the market not to make a run at the all-time high at $7.50,” said Terry Roggensack with The Hightower Report. “The market is trying to price in the damage done to this soon-to-be harvested winter wheat crop.”
    Soybeans and soybean oil seemed to joined at the hip with Malaysian palm oil, rallying and collapsing with equal fervor. Track the moves in palm oil and it should be an indicator of soybean and soybean oil direction.
    By far, Midwest weather will be the driving force next week as the eastern Corn Belt is drying out and traders are building in weather premium into corn prices. The eastern Midwest is expected to be dry this weekend with light rains moving in early next week.
    “It will help but not turn the drier-than-normal conditions around,” Mike Palmerino, a forecaster with DTN Meteorlogix.
    Chicago traders expect the government to drop its ratings of the corn and soybean crops by 2 to 4 percentage points in the good-to-excellent category in Monday’s weekly crop update because of the dryness in the east.

(Photo: Corn field in central Iowa near Ames. Photo taken by Chris Stebbins the week of June 11.)