Wheat: KW & NW

Hi Can anyone please fill me in on the difference between Kansas city wheat (kcbt) & cbot wheat?

I see they are pretty much correlated with slight deviation over the past week or so - Is there anything that could cause price action to meaningfully deviate (+ / - 10% or so) between these 2 contracts in the future, or is wheat just wheat?

Thanks in advance

J-S

 

Two kinds of Wheat.

 

Heres something to think about. Has anyone tried using a modified dow theory to trade different wheat grades? For example you could looking to go long on cbot wheat because it crossed it's 200 moving average but you wait to pull the trigger until kcbot wheat cross it's 200 moving average to confirm the uptrend.
It is simular to using the dow transports to confirm the dow industrials.

 

The lows are probably going to come at harvest.

 

KCBT Hard red winter wheat's flour is used primarily to make bread. CBOT Soft red winter wheat's flour is used to bake cakes.



Exporters normally prefer hard red bread winter wheat. Thus KCBT wheat has out performed CBOT wheat for the past 16 consecutive export seasons.

Do you see a spread opportunity here?

 

KC Wheat is "harder", it has more protein per bushel.........I think

 

What about the Minneapolis Wheat contract?

 

Minneapolis wheat is the 'hard red spring' variety. It trades at a premium to KW and Chicago wheat because of its high protein content.

There's an open outcry exchange in Minneapolis where the futures and options are traded.

 

How do you recommend trading Wheat contracts?

 

Wheat Spreads, if you do not mind building up a big position, waiting and waiting with no action, then seeing a windfall harvest every thanksgiving.