I have a hard time believing that supply will really be that tight come July...but I also have a hard time believing that the cash DTN index for Hard Red Spring wheat is more than 50 cents over May futures and yet it's been there for some time now.
The biggest problem trading the intermarket spreads at the moment is that each has a bullish story and the stories are all quite different. We got lucky that there was some rain in the Hard Winter Wheat areas to dampen the bullish story there and help our long July MGEX vs KC position. There are still other drivers that could increase the MGEX premium to KC and we saw some come into play today as July/Sep MGEX inverted (to July premium) while KC July/Sep pushed out to 100% of financial carry. I have noted in previous posts that KC July/Sep would be subject to the extraordinary factor of a contract spec change on the Sep contract, so that can go well beyond 100% of normal financial carry charges.
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