It looks to me as if KC wheat can continue to strengthen over corn in the near term. Corn has a long term bullish story and I see old crop corn contracts gaining vs new crop in the next few months. However, wheat either KC or Chicago contracts can gain against corn and may have a more dire demand story moving forward as wheat of Russian or Black Sea origin trade domestically at four year highs. The latest from the Russian Ag minister over the weekend is for the Ministry will do everything in their power to curtail domestic prices from rising to protect end users from paying up. This entails the release of stocks which in turn is giving thoughts of Russia being less aggressive in filling future world tenders. Meaningful demand could be switched to the US, as Argentina and Australia wheat crops this year showed sizable percentage losses from prior growing seasons. In my view the Russian export pace will continue to slow, as their sales the first six months of the crop marketing year were way too aggressive. Without saying or admitting it, their sales window closes while ours could open.
Trade ideas: Buy Kc wheat vs corn at 1.28 KC wheat over. First upside target is 1.56, high end of the gap on the charts. Instead of a stop on the spread I would simply buy a 495 March KC wheat put for 5 cents. Or place the stop on the spread at 1.19, risking 9 cents.
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