Scratch @ -3.25. I didn't like the fact that it stayed for 3 month in unusual territory and the curve is getting more bullish.
What do you mean when you say the curve is getting more bullish ? The ZW curve is really strange, SEP16-JUL16 should be lower than MAR16-DEC15 or MAY16-MAR16
Why do you think that? I think the ZW now reflects the current quality problems of SRW wheat. I read somewhere that indeed most of the crop is graded 3 overall , not even enough to meet delivery requirements:http://www.agrimoney.com/news/poor-quality-of-us-soft-red-winter-wheat-crop-laid-bare--8717.html So deliverable SRW must be indeed hard to get your hands on... And I have been in this trade for 3 months. It's not an anomaly anymore. When I entered the front of curve had a deeper contango so it really looked like March was undervalued. Now the front of the curve is getting flat making further 2016 expiries look quite normal...
"The soft red winter wheat crop, the type traded in Chicago, was, unusually, graded 3 overall – below the level needed to meet delivery against futures, without discounts." So, one can deliver his bad wheat, but he will get paid less
You cant deliver all qualities. If your wheat has too much vomytoxine, you cant deliver it. It seems that a lof of this harvest cant be deliver even with discounts. US farmer are likely to storage it for one year and mix it with next harvest wheat when lower quality discount will be lower than this year.
I don't think many farmers have multi-compartment grain storages and blending facilities. Elevator discounts are highest at harvest, then they decrease. Maybe it would be reasonable to sell it later this MY, i don't know. And what the problem with vomitoxin? 2015 average is 2.2 like previous year. 5year av. 1.4
Yeah, I wanted to say that they would sell they vomitoxin wheat later and elevators will mix it. I heard that a lof of wheat was above 3 or 4 in vomitoxin with seems to be too much for a lot use.