May/July CBOT Wheat at 5 cents premium May?
If Russia produced no wheat at all this year, I wouldn't expect May to go to a premium. More realistically, I wouldn't expect May to finish at a premium to July. Markets can go anywhere, but they can't stay there. Of course, the CBOT outpaced both KC and MGE to the upside, but only by 2-4 cents on a 30 cent move up in the outright price. Not by the 11.5 cents that Dec10 CBOT moved up against July11.
The CFTC COT report will be interesting: if there hasn't been a continuation of non-commercial buying, then I must be very wrong. As long as the non-commercial pour into the market, we will keep going...
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k/n definitely surprising, although lots of things don't seem to add up lately. Inventory with this stuff is just so risky now, even if the longer term fundamental view supports a position. Have luckely traded u/z very well but z/h has really been a wild and mostly unprofitable ride.
ReplyDeleteAm going to look into the Wheat CSOs next week and see what the pit makes for markets over in the options. I have heard CSOs in corn is good but have not dealt with wheat.
The options market definitely seems like the right place to be as far as holding inventory is concerned....
Just read the Grain Service newsletter (out of Atlanta) and they take the Russian crop damage very seriously--particularly extrapolating the effects into corn, barley and bean oil markets. On the wheat aspect of the Russian drought, they think global inventory will shrink significantly, though not catastrophically. Since the mechanism by which the global shortage will be alleviated is through exports of the gigantic US inventories, they note higher freight rates and predict higher freight rates to come.
ReplyDeleteFurther, the combination of global tightness and US glut could make the basis extremely volatile and wide. I don't have a lot of experience in the physical wheat market, so it seems odd to me to be talking about storing grain on the ground in Kansas due to overflowing storage facilities (discussed in the Grain Service letter) at the same time wheat is in backwardation only 6 months forward from the fall harvest...but that gets back to my comment on the cash futures basis getting wide and volatile.
Yeah everybody talking about how all the butterflys are just not making sense. I think we have come to a point where the market is wisening up to the fact that maybe these spreads should be at these particular carries for a reason. I think you have to keep bullspread hk and kn for now at least.....there is a reason they are inverse and im not a smart enough guy to tell you why.
ReplyDeleteI stick mostly to the front spread and 2nd spread....don't venture out too much further than that but those backmonths are really hurting some guys.