Eye-popping moves in wheat futures. Sep CBOT up almost 40 cents. Sep/Dec CBOT contango shrinks by a penny. But the Dec/July contango collapses by almost 15 cents? Wow. You got me. Like many others (apparently), I had too much on and had to take some large losses.
My idea is that there isn't all of a sudden a shortage of CBOT wheat. July CBOT was trading at full carry to Sep; Sep CBOT is still going to a full carry against Dec. But we have to pick our spots, and the Dec/ July spread is not where I'm going to make a stand.
So I've pruned our position back to just long MGE vs CBOT and rolled it to Dec-that spread closed with Dec MGE just 4 cents over CBOT.
The 30% rally in wheat prices over the last three weeks will certainly kill some demand. Whether there is actually significant crop damage in Eastern Europe/Central Asia remains to seen; the USDA had already factored in some damage in their most recent report predicting a large carryout. There is virtually no chance that the damage is significant enough to cause tight supplies before the next new crop. Nor any reason to think that European crop damage would make CBOT wheat equivalent in value to MGE wheat. Time will tell.
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Insane volatility lately.....spreads here at the CBOT just blowing up as locals blow out. Lots of bloodshed down here lately.
ReplyDeleteScary trade already for tonight.....am bearspread some z/h but will be taking it off tonight (will not go to sleep with this stuff on). Also buying wings in uzh fly out here too.
Tonight definitely feels like lots of puking as guys just give it up and move on. Would imagine we are SOOOO close to seeing z/h at its tightest levels (although I also thought that a dime ago)
BMH,
ReplyDeleteI posted a reply yesterday, I don't know why Blogger drops some of them....