MGEX Premium Revisited

It's been 2 weeks since I've commented on the MGEX premium to the CBOT. Over that period I've crept back into long MGEX positions against CBOT and KC. Today, I began to reduce the exposure to MGEX/CBOT. The cash Spring Wheat is still at a large 180 cent premium to Soft Red Winter Wheat, but the March MGEX traded up to 120 over CBOT and the other 60 cents might not be recovered if the CBOT basis remains at the current 75 cent discount for cash to futures.

There still seems to be a disconnect between the extremely bullish price action in the outright wheat prices and the relative calm in the calendar spreads. MGEX March/May has been at about 60% of full carry (using 2.25% finance), but the KC and CBOT have been out at 80-85%. In contrast, over in the soft commodities which have had similar rallies over the past 8 months, the nearby calendar spreads are generally in backwardation--sugar, cotton, cocoa all inverted with only coffee in contango.