And Now into Both MGEX and KC

With July MGEX at just over $1.50 over CBOT and July KC at only 35-36 cents over CBOT, I am long both the hard wheat futures. Cash markets for spring wheat are at least $2.50 over soft winter wheat and hard winter has at 50 cents premium to soft winter, so the forward levels are reflecting the steeper contango on the CBOT.

I suppose the theory is that higher nearby prices will kill demand for the hard wheats and so cash prices for them will ease relative to the CBOT's soft winter wheat as July delivery approaches. Essentially, the market is rationing the hard wheat efficiently and premiums will decline over time.

I'm not sure that's happening. Seems more likely that the relative shortage of hard spring MGEX wheat is forcing the backwardation to increase on that curve, while the CBOT curve indicates that market will stay well supplied right through harvest. It is just a lack of speculative capital that allows that MGEX contract to trade at such a small premium to CBOT out in July.