After falling about 45 cents from the beginning of the week, wheat recovers almost to where it started the week. I know that wheat recovered at least in part due to the broad support of all commodities but I think at least part of the aggressive selling was due to a renewed interest from the CME to do something to the contract to get convergence. I have traded futures contracts that don't converge and I have found that it is extremely difficult to trade it from the short side. Unfortunately there is almost nothing the cme can do to force convergence. They have been trying for the past year and have only come up with the VSR which appears to be doing nothing. This brings up another point. The reason for the lack of convergence, in part, is due to the large speculative positions of the index funds. Guess what, other commodity futures contracts are starting to experience the same problems and are characterized by large (record) open interests. My concern is that these contracts are going to go the way of the wheat contract as the specifications of the contracts and the limited underlying physical do not allow for the such large open interests. Trade these contracts from the long side, I think. Regards,local
Mostly cbot vs kc, however even those spreads get distorted because of the lack of convergence of cbot. Regards,local
I am reading today where KC is going to increase storage rates in an attempt to get better convergence. Why ? It is not working for cbot wheat, why do they think it will work in KC? This is almost comical especially on a day when there appears to be fund buying in wheat. Increased storage rates will do absolutely nothing should we enter an enviroment of inflation. Just my 2 cents. Regards, local.
the problem with the KCBT is you cannot get a warehouse receipt. so you have an UNdeliverable contract on a DELIVERABLE commoidty the system is broken in wheat both CBOT & KCBOT
That explains it, thanks. But if you can't deliver against it, why would any one sell it ? Trend following funds have gone from short (cbot)earlier in the week to net longs. I think the wheat contracts are ready for lift-off. If market experiences inflation, panic will first be felt in foodstuffs, not feedgrains, i.e. buy wheat, sell corn, I think. Regards,local
emg, are you watching this wheat, fasten your seatbelt, this one is going to the moon. Regards, local
The nov lot on MATIF is heading for expiry at 7,5 eur/mt over the jan contract. (nov expires in two days) Looks like folks want that wheat.
Do you have a link to that change....called KCBT and they had heard nothing (could have talked to the wrong person).... Thanks in advance.....