A Little More on Wheat Calendar Spreads

The CBOT, like the KCBT, is adjusting its contract specs for the September contract with respect to vomitoxin levels. From the CME SER:

The vomitoxin level for par delivery in the July 2011 contract, 3 ppm, will be deliverable at a 12 cent per bushel discount in the September 2011 contract...Because of this change in value, the 2011 July – September Wheat spread may expand (September increase relative to July) up to 12 cents per bushel beyond the quantity of the spread absent the change in vomitoxin specifications.

The CME goes on to say that they are adjusting the July/Sep VSR calculation to account for this "extra" premium for September contracts which is not due to storage, but due to quality difference. As far as I can see, the market has not allowed for anything like 12 cents difference in quality; possibly, this is because there is no grain in storage that is over the September limits, but that seems unlikely to me. I believe the additional premium for September contracts may apply just as much (if not more) to the KCBT as the CBOT, since they are making a similar change in delivery terms, though I don't believe that anything over 2 ppm will be deliverable against KC at any price.