July MGEX Staying Elevated

With another day at 10+ cents July/Sep MGEX backwardation and July MGEX at 70+ cents premium to KC, it doesn't so much look like a spike in July MGEX as persistent demand at these elevated levels. The MGEX deliverable stocks continue to fall in Duluth-- which is no surprise at this time of year, but could lead to a crunch on July deliveries. Especially if we see buyers looking to stop significant amounts the way Newedge did in the May contract.

I'm not trying to fight the trend, so I put on some long July MGEX vs KC and on the calendar. Right here I prefer to short the KC even though the HRW crop is likely to be small in the US-- I still think that there will be quality issues on the July KC deliveries (the last delivery month before contract specs are tightened) and I don't like shorting July CBOT at levels so close to corn.