All Wet in Canada

The MGE wheat contract, for Hard Spring Wheat, got a big boost today from news out of Canada. About 20% of Saskatchewan and Manitoba never got planted--not with wheat, not with barley, not with oats. Too much rain has left fields flooded. I don't know how this info was not available to the USDA for their most recent world crop estimates, but it came as a big surprise to the futures markets.

The July MGE jumped over a dime, to 70 cents over CBOT. The MGE July10/July11 spread flattened by a nickel to 60 cents premium July11. We did not anticipate this move and did not have anything on intermarket or in MGE calendar spreads. While this news is bullish for wheat, and especially Hard Spring Wheat, there is hardly a shortage--All the July/Sep spreads continue to trade at more than 100% of storage. I anticipate that the wheat market will stay in a full carry through the harvest in 2011. We were able to sell Sep/ buy Dec CBOT wheat at 25 cents; last week that was over 30 cents and the maximum VSR full carry would be around 34 cents.

We did jump in to buy oats vs corn (as I mentioned last Friday). After we bought our small oats position, the market went limit up-for now I am holding off putting on the hedge.