Going Flat into the Numbers Release

It's hard to imagine the USDA numbers being meaningfully positive for the wheat market. Last year's crop was big and exports aren't going that well. We already know fewer acres will be planted in wheat. But the world is full of surprises, and even if the numbers aren't surprising, the market reaction might be.

We are still going to look for opportunities to short the CBOT wheat futures vs KC and Minneapolis and to short the front of the CBOT curve against the back. If the market reaction is short-covering by trend-followers, we should get a chance to put on positions at better levels. If not, then at least we have the flexibility to trade any new developments.

May MGEX wheat futures have rallied about 25 cents vs CBOT since the December lows and are within 5 cents of their strongest levels against CBOT for 6 months. While I believe that the major trend for the year will be the weakness of the front end of the CBOT market, I don't think the market will really react until the VSR storage rates start to hurt--which won't be until August or September.