Wheat vs. Corn spread coming off of historic lows

Spread will eventually return to $1.75 premium Wheat

On June 9, the Wheat vs. Corn spread made a new all-time historic low of 40 cents premium Corn. This broke the previous low of  11 cents premium Corn from November 1983.  Over the years the lower band in the spread has been around 10 cents premium Wheat, as shown below.

The spread has rallied sharply from the June 9 low and is now about 23 cents premium Wheat. I think it is a fair assumption to say the spread will NOT retest the June low. Unfortunately the forward spreads accept this reality. The December 2011 spread is at about 70 cents premium Wheat. Just four months ago this spread closed at $3.68 premium Wheat.

Tightness in Corn could continue throughout the growing season and this could drive the December 2011 spread toward 40 cents premium Wheat. The new crop spread should be bought in this area. Historically the Wheat vs. Corn spread will return to about $1.75 premium Wheat within a year or two after trading near parity.

Markets: $ZW_F $ZC_F

###

Traders Boot Camp

Two exclusive 3-day Boot Camps for serious high-net-worth traders in 2012. If you trade at least $500,000, have three to five years of experience but have not achieved the performance you desire, this Boot Camp may be for you.
Only 40 seats are available in 2012. The next possible Boot Camp in the U.S. will be late summer 2014. Click banner for more information.

June 14-16, 2012
Garden of the Gods Country Club
Colorado Springs, CO October 11-13, 2012
The Broadmoor
Colorado Springs, CO

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

You might be interested in:
blog comments powered by Disqus