For the past two days we have seen MGEX wheat trade in a broad but well-defined range against the CBOT. In the back months, July has been a bargain around $1.05 premium and a good sale up towards $1.20--Dec12 MGEX has bounced between 60 cents and 75 cents premium. We seem to start an finish the day towards the lower ends of these ranges.
The big picture here is that MGEX wheat remains in a steep backwardation while the CBOT has a substantial carry cost. As long as this situation persists, I am comfortable maintaining an exposure that is long the forward (discounted) MGEX and short the forward (premium) CBOT.
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