We'll cross that bridge when we come to it. While the COT report from the CFTC will likely show a continued drop in managed-money shorts (and rise in commercial shorts), that is still just a bear-market rally. Right now, we are not going to fight the tape. We've closed out the intermarket wheat spreads that would be pressured by a rally.
Today I added exposure to "full carry" July10/July11 spreads on the KCBT by liquidating most of an offsetting July10/July11 spread on the MGE. Full carry for a year on the KCBT should be about 6 cents/bushel less than MGE due to lower exchange-defined storage charges- 4.5 cents/month on the KC vs 5 cents/months at MGE. The KCBT July10/July11 has been trading about 3-5 cents wider than MGE, so we have had a position in KC vs MGE on that spread, betting that the MGE would reach full carry and go out to a wider, steeper contango than KC. By taking off the MGE spreads today, we are left with just a long July10/short July11 KC spread. This is priced to yield around 3% on cash and should benefit from any perceived tightening of supply.
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