Scaling Back Positions

As the KC market strengthens vs the other wheat futures, I find myself thinking that the market is wrong-- and there will be consequences! That's usually a sign that liquidation is prudent. So we took off about half our intermarket futures exposure.

As the CBOT spreads widened to huge contangos over the past few months, that particular bet seemed less and less attractive. I think a sustained rally in prices would flatten out the calendar spreads and perhaps give us an opportunity to re-enter both calendar spreads and intermarket spreads at much better levels.

The market dynamics this week--hard wheat futures rallying faster than CBOT--are not typical of the past few months. I believe the previous pattern of higher CBOT volatility will eventually reassert itself. Until then I'm going to be more cautious.