wheat spreads

[local]

Four months after implementing the variable storage rate (vsr) for wheat, Dec-mar (z-h) wheat is trading at 37 under. This works out to about 12 cents/month. This begs the question, if longs are forced to roll their positions at 12 cents/month or $1.44/year, how long will it be before they (longs) view cbot wheat as an ineffective hedge ? I saw this happen before i.e. where the spreads work to the advantage of the short and shorts are forced to roll at excessive levels, and it ultimately led to the demise of the contract. Took several years but it happened. Perhaps in this era of increased volatility longs can justify using cbot futures but not too sure. Obviously not the case at the moment with corn and beans, one reason to trade those contracts rather than wheat.

Regards,local

 

[ubgr]

local:

Both kcbt and cbot jul went premium the may-contract last week. Now beeing late in the planting process, have you heard anything other than semi-good news?

 

[ubgr]

The market sometimes gives you a heads up.

http://www.agrimoney.com/news/us-winter-wheat-off-to-worst-start-since-the-1990s--2398.html

 

[local]

Quote from ubgr:

The market sometimes gives you a heads up.

http://www.agrimoney.com/news/us-winter-wheat-off-to-worst-start-since-the-1990s--2398.html

Also chatter that China looking for wheat to build reserves. Was wondering when this was going to happen. Funds short approx. 32,000 wheat. Buy wheat/ sell corn, I think.

Regards, local

 

[emg]

Quote from local:

Also chatter that China looking for wheat to build reserves. Was wondering when this was going to happen. Funds short approx. 32,000 wheat. Buy wheat/ sell corn, I think.

Regards, local

that will not be a good idea. I be on a sideline of any wheat/corn spread

 

[local]

Quote from emg:

that will not be a good idea. I be on a sideline of any wheat/corn spread

Not too late . I think this is going to be a good one.

 

[ubgr]

Quote from local:

Not too late . I think this is going to be a good one.

Me too. The dec/mar zw also looks good around here, I think.

 

[local]

Quote from emg:

that will not be a good idea. I be on a sideline of any wheat/corn spread

emg, I think you are a chart guy, take a look at the daily chart. Lots of upside potential. Dec wheat has been the short leg of several spreads. Short covering now that China has been rumoured to have been a buyer of wheat. Also worst crop ratings to start winter wheat growing season since 1990. Why be short wheat, because of the carryover, don't think so.I started buying wheat/sell corn yesterday, will continue today.

regards, local

 

[ubgr]

Quote from local:

(...)Also worst crop ratings to start winter wheat growing season since 1990.

New ratings are in: overall 47% good to excellent (compared to 46% last week). HRW: Kansas 38% (42%), Colorado 30% (31%), Nebraska 38% (40%), Oklahoma 31% (31%) and Texas 35% (29%) in good to excellent condition. SRW: Illinois 38% (50%), Indiana 23% (23%) and Ohio 65% (67%) good to excellent.

 

[ubgr]

Quote from ubgr:

New ratings are in: overall 47% good to excellent (compared to 46% last week). HRW: Kansas 38% (42%), Colorado 30% (31%), Nebraska 38% (40%), Oklahoma 31% (31%) and Texas 35% (29%) in good to excellent condition. SRW: Illinois 38% (50%), Indiana 23% (23%) and Ohio 65% (67%) good to excellent.

It was supposed to be 46% good to excellent compared to 47% last week.

ubgr