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800-262-7538(March 10, 2000) WHEAT: How about that old-cop/new-crop wheat spread! July wheat futures minus the price of March wheat futures popped out a cent today to close at 21.5 cents. Divide that by 4 months and the per month value of carry offered is 5.4 cents. $2.40 wheat at 9% interest plus 1.5 cents for storage and insurance = 3.3 cents per month needed or over four months = 13.2 cents. And the market is paying 21.5 cents! This is not indicative of a short supply/large demand market. May wheat futures are at $2.60 with May corn futures at $2.27. Think old-crop wheat won't compete with old-crop corn supplies...think again. Old-crop corn and wheat stocks are the huge dark grey cloud overhead. This year's new-crop wheat production is projected to be 2.5% less than year ago levels. USDA is not creative enough to push wheat out of this country and old crop prices are suffering. As long as moisture continues to visit the southern plains it should be difficult for commercials to get bulled up. Australia promise to plant another record wheat crop this year. Basis continues to remain weak and the Gulf NOLA is unresponsive on old and new crop. We sold one unit of July up against technical resistance of 2800 and will pull our risk down to protect and positive value of the trade.
Joe Victor
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