From the above discussions, several trends become apparent. Firstly there is a problem with convergence and thus the change to contract specifications of KC. More specifically, the changes attempt to encourage delivery (increase in storage rates) and in a sense swing the pendulum to the shorts. Interesting to read how the Board requested the Committee to reconvene and make the changes more eqitable, initial changes probably very slanted towards short (commercial). However, with a 60 cent rally over the past 3 or 4 sessions, I think the changes will do nothing to discourage large fund long positions. From a larger perspective, record long speculative positions will test the contract specifications of other commodity futures, particularly those with limited underlying physicals (e.g. oats, etc). These contracts were not designed to accomodate the large speculative positions and exchanges are reacting to the consequences instead of being proactive. Kind of a catch 22 situation for the exchanges, their revenue is based largely on trade volume, but the wrong type of volume challenges the viability of the contract. In 2008 the Minn. contract went to $26. I think much of wheat happened there is happening to the other wheat contracts. Forget the large wheat carryover, if shorts won't delive it becomes meaningless. In the meantime, make money off of it. Just my 2 cents. Regards,local
Anyone keeping an eye on those new-crop wheat spreads? Getting awfully flat in post-july 2011 here. They have been planting winter wheat with both hands in Europe. And that carry over of SRW in US aint going nowhere with half of australias wheat crop downgraded to feed. I think there are some good bets for next year unfolding in CBT wheat at the moment.
too early. wait 2 weeks before the jan USDA supply and demand estimates. Grain stocks. Winter wheat planting. Something will happen then
Even though I do think you're right, if you are to put on a decent line in those far dated wheat spreads, you ought to start early (they trade thin). My guess is that, when comes january-february-march, new crop's structure will be steeper than this, even though Europe is exporting like never before and higher quality wheats are getting thight world wide at the moment. Focus will be on planting area and feed wheat surplus.
Hello local. I hope and i wish to be well. I have a Question for you this Hour. What do you believe for the following Spread: Long KCBT Wheat May 2011 - Short CBOT Wheat May 2011. Right now, that Spread is in about 34.50 Pips Advantage KCBT Wheat. Kind Regards, George Kanellopoulos.
The trade believes that the shortage in wheat is in high quality wheat, therefore KC should stay at a healthy premium to Chicago. I was trading the Marches last week between 50 an 60 cents. However, don't like trading spreads like these when market conditions are this volatile because you tend to lose perspective of the big picture. i.e. make a few cents on the spread while missing a 50 cent move of flat prices. Learned this lesson the hard way during significant moves over the past 25 years, make a few cents on the spread and miss the larger picture. Also, it is probably the right position to have in the long run but significant short covering in Chicago could give you better opportunities later on, it happened earlier this year, also hapened 2 years ago when chi was 50 over kc. Regards, local
Always appreciate the insight from those with more experience. Thanks and happy holidays to you and yours.