Spread differences between Chicago, Kansas City and Minneapolis wheat have been historically skewed the past few months…………………………some say that the speculative community got caught being long Kansas City and short Chicago which allowed for Kansas City to slip to a very large and unnatural discount to Chicago this month……………………………..In its natural state Kansas City is typically 15 to 20 cents premium to Chicago as the old adage of paying for protein prevails……………………Yet, it hasn’t and some have stated that the quality of the Chicago soft red based contract was less than stellar this year and basis levels have been firmer than usual as millers and exporters are willing to pay up in the cash market and forego the delivery game given the vomitoxin variable and no guarantee that receipts received are graded as fit for human consumption………………….Why play the delivery game when milling quality wheat has to be negotiated when taking delivery? We anticipate some adjustments between the three contracts as we approach dormancy and winter kill talk and the seeding and final production and stocks-in-all-positions reports in early January……………………………Comedy and commodity trading share the “timing” component! Is it time to attack KC/Chicago? We are always cautious and we sense that being long Chicago and short Kansas City might be very dangerous at the present moment………………………
South American weather has been superb and the world may be blessed with a fantastic crop in the US and another fantastic crop in Argentina and Brazil……………………It appears that end users will be enjoying a buyer’s market for a few more months…………………………November 2019 Beans/December 2019 corn at a ratio of 2.35 and this is bucking up against the traditional level at which beans are planted over corn and there might be some argument that we’ll need more corn acres than beans acres next Spring…………………………….This might keep beans under a little pressure for the next few weeks in relation to corn and wheat…………………………
Corn has been the red headed step child of the grain community for a few months as a large crop needed to find a home for the winter and space issues have surfaced………………………………There will be a need to move the corn piles the next three months which may keep basis levels and spreads on the defensive………………………………………First notice day is Friday and traders suspect that deliveries might be healthy…………………………………..
The information contained on this site is the opinion of the writer and obtained from sources cited
within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in current market prices.
Steve Bruce
Walsh Trading
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