Buying Strength

While I never advocate following a trend as a method of trading, I do try not to fight trends. MGEX has vastly outperformed KC and CBOT for 10 months, but because of the very different forward curves, MGEX can still be bought at levels that are not quite nose-bleed inducing. After spending a few days bouncing around 60 cents premium, Dec MGEX made a new high moving to 65 cents over KC.

With cash Hard Red Spring at a $2.20 premium to Hard Red Winter, and Sep/Dec MGEX in a small backwardation while KC is at 80%+ of full carry, there are clear indications that Hard Red Spring wheat market are tight and Dec MGEX at 65 cents premium to KC may be a bargain.

After the USDA announced much larger than expected inventories of corn last Thursday, the July corn (which is in delivery) shot up to over 50 cents/bushel premium to Sep--the highest since April, when corn was making new highs. So even if the UDSA found 300 million bushels, it doesn't look like the market found them.