We're Back in the Front

As I indicated yesterday, the prospects for steeper CBOT contango in wheat has driven me back to the front end of the market in the intermarket wheat spreads. We want to be short CBOT wheat futures, and it's primarily because the deferred months are too high compared to MGE and KC deferred months. But that doesn't mean we need to have our position in the deferred months; we can pick up the benefit on the futures rolls as we go.

I still think the market is underestimating the impact of VSR on CBOT calendar spreads- the July10/July11 spread which has widened from 60 cents to $1 over the past 5 months could be on its way to $1.20-$1.40. We don't have a position in it, but I want to avoid being on the wrong side of it.