It was always a danger to my long MGEX/short CBOT position that there would be a sharp rally driven by CBOT shorts. We saw at least part of that rally today. Impact was biggest at the front end of the market with Dec11 MGEX losing almost 50 cents against CBOT wheat. Going out a year, Dec12 MGEX only dropped a few cents versus CBOT.
As I look at the amount of Spring Wheat showing up at the MGEX elevators in Duluth and Minneapolis, it seems that the futures curve backwardation may continue for some time. While $2.70 premium for Dec11 MGEX to CBOT may be a risky place to buy, $1.00-$1.10 premium for July looks like a good bet. I'm in there and I will add cautiously. (Which is unlike how I exit-- which is in a hurry.)
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