Losing Patience

After a couple of days where wheat rallied and premiums for hard wheat slipped, wheat fell along with other grains and the premiums for hard wheat began to strengthen again. While I am still concerned about CBOT short-covering, as I short CBOT against KC and MGE, I think it is worth putting on at least some position in the deferred, July11 KC vs CBOT and MGE vs CBOT. I am a little more confident than I was last month on the behavior of the CBOT contango; while a CBOT rally may shrink the premiums for hard wheat, it may also shrink the CBOT contango, leaving the July11 intermarket wheat spreads relatively unaffected by this short-covering rally.
A big factor in this tactical shift is that buying nearby MGE at 32 over is fundamentally less attractive than last month's 12 over. Same with nearby KC at 17 over as opposed to 5-7 over. In contrast, the July11 MGE and KC are still at good discounts to CBOT.