Wow, Even More Wheat

OK, I'm surprised. Despite the relentless drop in grain prices, inventories are growing and planting intentions are higher. The market offered some opportunities for trading today, but I was too nervous to jump in. Pretty foolish in hindsight. It was a pretty simple story: bigger inventories ahead -- and wheat opened lower and traded down all day.

As has been the norm, CBOT led the market down and the premiums for KC and MGE returned to their highest levels of the month (many months, really). Had we not flattened positions last week, we would have been disappointed, though. With the market down another 20 cents/bushel, premiums only returned to 11+ cents for KC and about 32 cents for MGE. In this environment, I'm just looking to enter on the long KC or MGE/ short CBOT side, and we can afford to be picky.

The move down in grains is not helpful for the ethanol/gasoline position. In fact, the short gasoline side is very worrying. There are the usual worries about bullish oil news, but also the concern that S&P will continue upward and onward. We may have this trade on at the wrong scale; I would prefer having a position only half the size, but that would be too small to be practicable.