The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
I have received some questions as of late about wheat prices rallying over corn prices. One reader was entertaining the thought of going long March KC Wheat vs short March Corn. I certainly believe that "IF" wheat were to catch a big story (production problems in Australia, continued problems in S. Hemisphere, export bans in Russia, etc...) Kansas City Wheat could be the market that runs as "premium quality" will be in short supply. The downside is the "Funds" aren't huge fans of the KC or Minneapolis contracts, and when a wheat story starts to gain traction the "money-flow" often gravitates toward the CBOT wheat contract. Not to say the reader is not on the right track. In fact, several large traders in the industry are currently building positions going "long the KC wheat vs short the Chicago wheat" at $1.35 or better. I haven't really heard of anyone betting on the KC wheat over the corn market as of yet, but I could certainly understand the reasoning. I assume if corn ends up a little better than we are thinking and global wheat production continues to struggle, you will have a winner. I am just not so sure you want to bet on the corn crop "improving" from here. I believe the current 123.4 yield could drift lower...maybe not as low as as the 115 estimate some are throwing out but closer to 120 seems to be a definite possibility. Total production estimates seem to be between 10.2 and 9.8 billion bushels vs the last USDA estimate of 10.779 billion. Obviously, the difference and concern is in the "harvested acres." The USDA is still at 87.4 million while the trade is thinking something much lower.
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