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| a few comments..KCBoT membership is voting this week to go to a VSR storage system like CME did. Basically if board carries are wide then storage rates for wheat in deliverable space increases. There is a formula, I ll spare you of that. But the concept is that the cost of being long the nearby contract increases as the storage rate for deliverable stocks increases. So what does this mean to the basis? As ther nearby option falls, the demand for space earnings increases as the spreads widen. Basis improves. The demand the USA is seeing for wheat given the Russian failed crop is estimated to leave approx 250 Million bu of HRWW carryout. I would guess 80 million of that is in deliverable space in Salina, Hutch, Wichita...About 106 million there today with a cash market that is still 40 cents away from pulling those stocks. Today the MArch /july 11 contract is an inverse. Whats all that mean? Space in the country for new crop should be ample. Elevators will bid the basis up to get the ownership etc. My advise...Do not sell the cash wheat. Get comfortable with the margin calls either with the elevator of with a futures guy. Bais in your neck of the woods will be 70 under KWN11. If approved the Variable rate storage is set to begin with the KWU 11 contract. You are thinking correctly though in terms of selling some new crop wheat especially if you tend to buy CRC or RA crop insurance. Dont pay the premium for the harvest price option. Corn is still going to move higher here and will pull wheat along for a bit. I expect we will revisit the old highs in wheat before Thanksgiving....then I'd let some go. BUT not the cash...You are giving up a dollar.
Rod | |
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marketing advice on wheat
