You Just Have to Have Wheat

Yesterday's "strange" price action on the close was just plain wrong today. As the wheat market rallied another 2%, the CBOT calendar spreads went back to flattening out. Again the CBOT outperformed the other futures markets on the way up--indicative of speculative interest.

It's hard to say how far this rally will go. The strengthening Euro helps wheat go higher. Generally higher commodities spur a bit of commodity index buying. Could be some smaller harvests in Central Europe.

I don't think there's much left. I think the Dec/July11 spread is being forced to smaller July11 premiums because there are producers locking in high forward prices while speculators are buying the nearby months. There isn't a shortage and it won't work out well for the speculators. While it is certainly possible that they make money from here on wheat longs, it's hard to believe that speculators wouldn't do better to buy corn, beans, ethanol... something that isn't at full carry.