Where's the Top?

Unfortunately, there won't be a sign posted. Wheat was pretty strong again today, giving back only 1%-- even as corn dropped 3-4%. The calendar spreads stayed at the much flatter contangos established last week; the Dec/July11 CBOT is almost the same price as the same period on the KCBT and the MGE. Given that storage rates will cost CBOT holders more than double the rates at the other exchanges (and there will be wheat in storage), that's very tight.

The CFTC COT report showed trend-followers now long wheat as well as the other grains. It took quite a large price rise to induce commercial sales that cover both the commodity index longs and the managed-money longs. Now that both those sectors are on the same (long) side of the market, the August roll period (Sep futures to Dec) may go to very steep contango as commercial shorts will only accomodate the rolls at levels that have attractive economics for storage.

While some continue to imply that dry conditions in Europe and Central Asia are bullish for wheat in general, it's hard to see how it should be as bullish for the Winter Wheat crops that are aleady in--as compared to Spring Wheat crops that may see far more impact. If this rally is based on more than short-covering positive feedback loops, then Spring-planted crops like MGE wheat and CBOT oats should outperform eventually.