Mighty, Mighty MGEX

Not only did July/Sep MGEX finish at 18 cents premium July, but the rest of the calendar through July 12 traded at a small backwardation. I don't see how the supply/demand balance sheet for spring wheat points toward a market that tight right through the new crop harvest, but that's the market now.

The premium for July MGEX over KC has been varying in tight correlation with the movement on the calendar spreads. July MGEX has moved up a lot versus KC, but Dec MGEX is still only about 15 cents premium to KC--which is a bargain if the new crop MGEX spreads are predicting a tiny spring wheat harvest in September.

On the MGEX exchange front, the ICE says they are going to launch a spring wheat contract meant to appeal to Canadian interests--Canadian delivery points, perhaps priced in Canadian dollars. Seeing the poor job they've been building interest in current ICE Canada products (canola and barley), it seems a misguided effort to me. In a sane world, they would just buy the MGEX for $100MM using ICE shares as currency. ICE gets a thriving contract, they add the Canadian version if they like, and have the prospect of developing the grain index contracts--MGEX members get the liquidity event with favorable tax treatment. MGEX would certainly be more profitable immediately if it were merged into ICE.