Leaving the Party ...Again

It is easy to get complacent sitting with a winning position. It's also easy to exit a good trade and fail to get back in....

Wheat rallied about 2% today; nothing special in the context of the sharper weaker USD and strong equities and commodities across the board. The hard wheat vs soft wheat premiums stayed close to the highest levels of the year and we took the opportunity to reduce risk. We closed out most of our calendar spreads and all the hard vs soft wheat spreads.

I rejiggered our intermarket exposure so that we have a long MGE/short KC position in July10. Recently, I have kept to MGE for long hard wheat exposure because I don't really understand why the cash basis for Hard Red Winter Wheat (KC) is so weak. The index of hard winter wheat (published by DTN) is over 20 cents below the cash soft winter wheat index and over $1 below the July KC futures. I'm not saying the cash basis is a leading indicator of intermarket futures spreads, but such a large basis has a very negative impact on hedgers and will attract some notice...