Wheat Makes New Lows

CBOT wheat continued to fall both in outright price and in relation to MGE and KC. Calendar spreads steepened back toward the highest contangos yet for July10/July11. The USD remains strong, weather looks good, farmers are starting to look at some tough times:
Farmers Facing Lowest Wheat Prices In 5 Years

I'm not going to try to call the bottom on wheat, and we did dip in a toe on a new long July11 MGE/short CBOT intermarket spread at 9 cents premium MGE, but I'm not thrilled about putting on bear spreads at these current levels. The CFTC COT shows that trend-followers continue to establish new shorts, while indexers also trimmed longs, with commercial buyers taking it all in. Sure, if commodities as an asset class are liquidated, then index liquidations could pressure wheat down 10-15%. Or if the USD appreciates significantly from here, US wheat prices will have to drop to maintain exports. But with China loading out cargoes of corn and cash Hard Red Wheat priced at 1.15X corn, I think some of the wheat is going to start to disappear.