No surprises in today's USDA numbers. Wheat acres planted are down from last year, but the weather has been good and the crop looks good and inventories remain large. The short July/long Dec we entered a few days ago at 42 cents premium Dec is now 46.5 premium Dec.--we took some profit (since it won't go too much over 51) and added some short July11/long Dec11 at 28.50 cents premium Dec11.
This 2011 spread is a bet on the new crop after this new crop, and so is significantly more speculative. For 2010's July/Dec, almost any crop plus current inventory will put the spread out to the new VSR full carry. For the 2011 spread, we actually need the inventories to stay large for quite a bit longer. Of course, the pricing reflects the uncertainty and I believe that when the 11 cents/month VSR charges come into view in 2010, we will see the back months respond. Many market participants seem unaware of the new VSR rules.
For reasons unknown, hard wheat strengthened against soft wheat today with Minneapolis (MGE) up a nickel and KC also up a penny or two.
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