Speculators Cut Back on Risk, Wheat Goes Higher

As one of the few commodities where the managed-money crowd is short, wheat seems very contrary --moving 2% higher on the day, after opening down 1%. There isn't any bullish news. Good weather, strong dollar, stiff export competition: all bearish.
For the past few days we have been waiting for a chance to get back into our long MGE and KC/ short CBOT position; today we stopped waiting for the perfect opportunity. While the intermarket spreads continue to be affected by day-to-day outright price movement, the bigger picture shows a trend toward stronger premiums for MGE and KC over CBOT.
The outright market may or may not continue to rally on trend-follower short covering, but I don't feel that flat is the right answer at this point. After peaking at 20 cents over CBOT we bought July KC at 11-12.5 over CBOT today; after trading as high as around 40 cents over CBOT, we bought July MGE at 31.5-34.5 over CBOT today.

Yesterday I said we would wait and see on the outright ethanol. We dumped it today.