Posted by: usset001 | April 21, 2011

Keeping an eye on the July/Dec corn spread

Intramarket (aka interdelivery) spreads can shed light on the bullish or bearish tone in the market. A true bull market in grains is characterized by (1) rising prices and, (2) narrowing intramarket spreads, or increasing inverses.

The corn market feels bullish but remains volatile. The accompanying chart of the July/December 2011 spread says it all. This is an old crop/new crop spread, and the premium for the old crop July contract has been generally increasing since last fall. However, this spread has been increasingly volatile over the last six weeks. The inverse dropped over 40 cents per bushel this week alone.

Is the recent action in this spread a precursor for a market that is about to turn?


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