Chicago Wheat November 25, 2019
7 responses | 2 likes
Started by metmike - Nov. 25, 2019, 5:03 p.m.

Karen Braun@kannbwx

Chicago #wheat is historically expensive versus K.C. and Minneapolis (pictured). On Monday the Minne discount was around 33.25 cents/bu, the largest since 9/28/07. Since 9/28/07, there have been only 18 days (incl. 5 last week) in which Minne finished at a discount to Chi.


If you're wondering what those 18 days are: Oct. 1-4, 2007 Aug. 5-6, 2010 July 13-14, 2015 Nov. 4-6, 2015 July 11, 2019 Nov. 18-22, 2019 Nov. 25, 2019 FYI: this is comparing front-month futures and based on settle prices.

By metmike - Nov. 25, 2019, 5:05 p.m.
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This is the same chart (not updated for Monday's close) if I didn't edit out the huge 2008 spike. Minne #wheat futures surged about $24 per bushel in the spot month on Feb. 25, 2008.


By metmike - Nov. 25, 2019, 5:07 p.m.
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Here is K.C. #wheat versus Chicago (30 years worth). The front-month spread has not settled >0 since Oct. 19, 2018. K.C. finished 95.5 cent/bu under Chicago on Monday. The size/longevity of the KC discount is totally unprecedented. BTW- no idea what happened on 3/20/96.



By hayman - Nov. 25, 2019, 11:38 p.m.
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That inverted relationship between KC wheat and Chicago resembles the upside down relationship now between Platinum and Gold.  Great work bringing forth this very important spread and its historic unusual situation!

By redux - Nov. 26, 2019, 5:47 a.m.
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Years ago there was a poster/stimpy that published some ebooks. I think i supported everything he wrote including his weekly spreads advisor. This Kansas vs Chicago protein spread was like the Platinum 2 contracts vs 1 Gold, about real value skew, his tips on good looks at the right time. This wheat spread is deep, interest rate cuts affect both comtracts so carry aside, the chasm is normally explained by hedge funds ignoring the kansas  and using chicago wheat to diversify against equity cycles, pushing money into the commodity markets. i watch this wheat spread , now it has pulled me in to post, thanks mike! Unfortunately, i never deserved a seat at the table with authentic traders that posted here. I trade but never at a profit at the end of the year. Fundamentally, there is always more kansas supply and demand for its superior protein value, chicago wheat normally at a discount. May 31 of this year to now, on the May2020 spread is about 3800$  to chicago premium, just saying thats the pay approaching  par. the stuff undermargined traders will one day say, i spread em like prince andy

By metmike - Nov. 26, 2019, 12:42 p.m.
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Wonderful comments redux!

Good to see you posting.

The Chicago/SRW wheat premium has been mind boggling, almost $1 above the KC/HRW in the December as of this post. Wow!

By cutworm - Nov. 27, 2019, 9:31 a.m.
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As I remember it March 1996 wheat front month in delivery had a short squeeze. They said in the last day of trading that floor traders just watched as the long would not sell. I believe that is what made that spike down on the chart.

Edit the squeeze was in Chicago wheat 

By metmike - Nov. 27, 2019, 1:17 p.m.
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Thanks for the explanation!

I remember that one happening cutworm and though I traded wheat in those days too, was not in the market at that time frame.