I have been bullish on MGEX wheat (vs CBOT) since I started keeping this journal 18 months ago. But apparently I am not the most bullish cheerleader--I sold out the balance of my MGEX intermarket spreads.
The USDA numbers certainly favored Hard Red Spring wheat over any of the other main varieties...but by how much? The large premium for Dec11 over March12, now near 50 cents seems to be more of a delivery game than true demand for higher protein wheat. The premiums for 14% protein wheat at Kansas City do not appear to support Dec MGEX at 1.87 over KC or 2.85 over CBOT.
Further, the squeeze on MGEX does not seem to extend very far out the futures curve. While Dec is 50 cents over March, May only commands 12 cents over July, so there is some implication there of a short-term phenomenon rather than a new long-term structure to Hard Red Spring wheat pricing.
Eventually, I will get back in long MGEX--and prehaps at higher premiums than we see today--but for now I will wait. I would like to see non-commercials exit their short CBOT positions before I stake out a short position there.
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