Wheat Weakest of the Grains, KC Weakest of the Wheat

With corn almost unchanged and soybeans a bit up on the day, wheat spent the day a solid 1-1.5% lower. As usual, CBOT led the move and the premium for Minneapolis increased. Unusually, KC was even weaker than CBOT and the premium for May KC dropped to about 9 cents over CBOT. On the assumption that this is just some noise, we established a new long KC/ short CBOT position.

While 9 cents over Chicago is not a great bargain for KC wheat from a historical view, in the context of today's inventories and the coming increase in storage charges for CBOT, it is pretty reasonable. This likely adds to the risk we have on our CBOT calendar spreads--both the intermarket spreads and the calendar spreads should do better in bear markets for wheat.