Another Post Lost in Cyberspace...

I have had a few very bad trading results over the past two weeks, but I haven't stopped the daily posts. Something about posting using the hotel wi-fi just didn't work consistently.

As of last Friday, I thought the worst of the damage had been done--that most of the short-covering on the CBOT that squashed the MGE/CBOT premium and the CBOT contango had taken place. This morning that is not so clear. The CFTC COT report didn't show a lot of short-covering through last Tuesday and the spike up in wheat prices indicate there were still more stop-losses to be hit.

Of course, I am mainly on the lookout for signs that our current positions are wrong, as opposed to poorly timed. The July/Sep wheat futures spreads are still at full storage costs (though not much beyond that). The Sep/Dec spreads do not reflect any tightening of supplies on any exchange. The only real mover this morning is Dec/July CBOT, where I believe outright sellers of the 2011 crop are combining with front-end short-covering to force in the spread.

While the market can stay irrational longer than we can stay solvent, as Dec/July trades into levels inside of actual storage costs (around 52 cents), we can expect producers to unwind hedges and sell the cash Soft Winter Wheat or roll the hedge at least back from July11 to Dec10.