Where from Here?

Friday's trading saw both a market reaction to bearish news in corn and step toward normalization of intermarket spreads in wheat. While traders that are long corn futures seems relatively undisturbed by Friday's WASDE report, corn underperformed other grains and commodities in general. On the whole, the bullish prospects for the new crop still shine and there isn't that much old crop left.

In the wheat market, a dramatic drop in the premium for KC over CBOT was the feature of the day. A little precipitation and a little extra inventory in the WASDE and the KC futures took a big hit. I am not a bull on the July KC against anything. For a lesson on how the changing contract specs can affect a futures market, just take a look at July/Sep rice. And while new crop CBOT wheat is going to be very well supplied, it is already very cheap--practically even with corn. So there is support there that KC will not have.

The main opportunity that I saw Friday was that July MGEX dropped to below $1.30 premium to CBOT. Given that there may be continued pressure on the above-mentioned KC/CBOT spread, I decided to wait and see if that gets cheaper before jumping in.