Grain Spreads: Wheat/Corn

Sean Lusk General Commentary Leave a Comment


It is my belief that winter wheat futures overnight hit the highest levels in 2 1/2 months on concerns an intensifying Russia-Ukraine war will disrupt grain shipments from the Black Sea region. Prices turned lower early in daytime trade but have firmed again, though they are well off their overnight highs. In my view Ukraine’s exports through its Southern export terminals are at potential risk as Putin prepares to escalate the war. That said grain is still moving, largely over its western border via rail. Nine percent of Ukraine’s winter crops have been planted thus far, versus its intended acreage. It’s 2023 wheat production is expected to fall to 16 – 18 million metric tons, down from 19.2 million metric tons (mmt) in the current year, and down from 33.0 mmt in the previous year. I attached a March Chicago Wheat/Corn futures spread. We have seen this spread rally 80 cents off the lows. That comes after a $3.14 cent break. I would like to determine if this is a bounce from an oversold situation or the start of a move higher towards the 50 percent retracement level perhaps. With less wheat planted in Ukraine for 22/23 and crop problems elsewhere for wheat (Argentina), amid US corn harvest, maybe there is a story here in the long run. Trading this spread carries unlimited risk, so depending on one’s risk profile, the mini contracts may be the play here, given reduced margin and staying power. No trade recommendations today. 

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