Gravity Too Much for Wheat

With the USD lower this morning, wheat started the day up 2%, much as it did on Friday, but again, the market for wheat was pulled inexorably back toward unchanged. There was nothing notable about the intermarket wheat spreads--all stayed within recent ranges. The May/July CBOT wheat spread moved by about 3 ticks tighter (less contango) as speculative shorts and commercials raced to accommodate the "Goldman roll." More deferred calendar spreads did not react.

I decided to make a further bet on ethanol; this time against corn. While there isn't much protection long ethanol/ short gasoline--gasoline could always spike, there is a bottom on the ethanol/corn crush spread. We are within a few cents of the smallest premium for ethanol over corn in over a year. (CME defines the spread simply as Ethanol- (Corn/2.8) to reflect the 2.8 gallons of ethanol from a bushel of corn. Of course variations in energy prices can be important, but on the scale of about $1 move in nat gas= 10 cents/gallon on the ethanol production costs.)The margins are down where ethanol production isn't worth the trouble--yet ethanol remains very cheap vs gasoline.
I took delivery of April ethanol after buying it around 3 cents under May. I also bought May around 3 cents under June, but flipped the May back out today at 1.9 cents under June--so maybe the inventory situation in the ethanol market is tightening up a bit.