A Humbling Trading Day...

The wheat nobody wants is not always the same as the wheat futures nobody wants. Hard Red Winter Wheat may be trading, on average, at $1.20 below the July KC futures, but July KC was the best performer on the day. KC outperformed CBOT by 3 cents and MGE by around 5 cents. Exactly what we didn't want to see.
We scrapped the long CBOT/short KC position. We kept the long MGE/ short KC position. The former was supposed to benefit from a rally in outright wheat prices...it didn't, and it's not a "core" position that we are going to build a strategy around, so we are flat there now. In contrast, the MGE should continue to benefit from a widening protein premium. The weather news from Canada may well have more impact than the 10-15 cents that the market has added to the MGE premium to KC.

We took off the short Sep/long Dec CBOT calendar spreads we just recently put on. As the outright market rallies, there may be better opportunities to short the front/ buy the back.

Outside of the explosive rally in oats, the conventional wisdom in grains is that the large inventories of wheat will act to suppress any significant rally. While this may be true, it is also baked into the price. I think it's likely we will see higher consumption (especially livestock feeding) and we know there will be lower production from the Far North. A 100 million bushels here, 200 million bushels there and there isn't such a large inventory anymore.