Watching and Waiting Some More

After scratching my intermarket wheat spreads, here's what I think now:

Corn is driving the market. As corn goes higher soft wheat gets pushed higher--the DTN cash index for soft wheat is 33 cents under corn as it is. Last month we saw Pilgrim's Pride announce that they are feeding wheat to their chickens. Today we see that The Anderson's is blending soft wheat into their corn at their ethanol plants.

CFTC COT reports showed non-commercials short the CBOT soft wheat contract, while the non-commercial long positions in MGEX hard wheat remained relatively intact. So while desperate shorts may be covering on the CBOT, there aren't many shorts at all on MGEX (and few on KC) to drive those markets.

So the effect of higher corn prices right now is to diminish the premiums for higher protein wheat.

The problem with trading on this market dynamic is that it requires one to anticipate the price of corn. I don't want to make a big bet on higher corn...or lower corn. So, I'm going to watch and wait for a while.