More Hard Wheat Strength

Dec MGEX (72 cents premium) and KC (56 cents) improved to new highs for the season against CBOT.

I haven't commented much on calendar spreads since I got smoked on them over the summer. After taking my losses, I noted that I still thought that CBOT wheat calendar spreads would go to full carries as deliveries neared and that forecast looks pretty good today. My problem then (and still) is that the direction of the calendar spreads is correlated with the direction of the MGEX and KC intermarket spreads; so I have to pick where I would prefer to take my limited amount of risk. Anyway, the Dec10/Dec11 on the CBOT reached its biggest yet contango (111+ cents) while MGEX at 43 cents carry from Dec10/Dec11 is nowhere near the early July levels of 65 cents. Should the CBOT stretch to over 120 cents for a year, I think the risk/reward shifts sharply toward favoring a long front/short back month strategy.