Posted by: usset001 | April 27, 2011

Interdelivery wheat spreads in Minneapolis

Sep'11 Minneapolis wheat (new crop)

I continue my examination of interdelivery spreads. I looked at corn and soybeans earlier. I want to turn my attention to wheat, and start with my personal favorite wheat futures market and the Minneapolis hard red spring wheat contract.

Following a strong and steady rise in prices over the last half of 2010, the wheat futures markets in general went on the defensive in February and March, with prices falling about $2/bu. Prices have recovered much of that ground over the past 6 weeks.

Sep'11/Mar'12 Minneapolis wheat spread

The Sep’11/Mar’12 interdelivery spread is marching to the beat of a different drummer. While flat prices rise, the size of the carry from September to March has been increasing.

(I need to point out a subtle difference in our look at the corn and soybean markets, versus what we will examine in the wheat markets. In corn and soybeans, I focused on old crop/new crop spreads and in both cases the spreads were inverted. In wheat, I will look at spreads withing the same 2011 crop year. Here we will see positive carrying charges.)

You can see for yourself that the Minneapolis spreads have been widening – trending from modest inverses early in the year to a 20 cent carry today. This is not the type of interdelivery trend I would expect to see in a strong bull market.

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