Waiting for the USDA

Wheat futures traders, including this one, spent the day assessing risks going into tomorrow's crop report. We will get numbers both on usage to date and planting intentions. I will be surprised if the market gets the higher spring wheat planting numbers it's looking for. Generally, the non-commercial spec traders were looking to cover for most of the day, and the market rallied about 1.5% on the close as they took some chips off the table.

The late rally squeezed the MGE and KC premiums for May down by 3-5 cents, so, for now, we're glad we squared up last week on intermarket wheat spreads. On the calendar spreads, where we have positioned for steeper CBOT contangos Dec10/Dec11, we hedged with the reverse on KC Dec10/Dec11. We were a little lucky, since this is how I wanted to position and interest came into KC just when we wanted. In a nutshell, we have locked in holding Dec10/Dec11 KC wheat at 2.5% over storage costs while selling Dec10/buying Dec11 CBOT at 4% over current storage fees--but the CBOT storage fees are variable, and will rise by 7.2% (annualized) come July, while KCBT storage rates will not be changing. So while KC is trading at a "full carry," CBOT is not even close to full carry.

As I write this, the long ethanol/short gasoline trade is not doing much. Crude and gasoline are tracking S&P's a little higher; the rally there continues, but is, hopefully, running on fumes.