Spec Trade Kansas VS Minni Wheat

Featured Commodity: Wheat Spread between Kansas and Minni

Reasons: I think that the spring wheat crop will be average to slightly better. I think that the winter wheat crop is below average. All the crop reports and other research seems to indicate this. I think that market won’t wake up to this until October.

Technical aspects: In the fall we should see the spread between the two narrow in and possibly turn positive as in Kansas is worth more than mini.

Is there Trade?:

Trade Idea:

o Enter into Spreadsheet: Yes

Overall Riskiness: Not too bad. Current spread is around 50 cents

Risk: risk 50 cents on the spread.

Reward: could be a dollar. Kansas could move 50 cents under to 50 cents over.

Duration: This trade will need at least until Dec. By then all the numbers should be in.

Mechanics:

o Entry: July 27-22 Close: Buy March 23 Kansas @ 8.72 and Sell March 23 Minneapolis @ 9.31 spread of - 0.59 (8.72-9.31)

o Exit profit: Kansas goes 50 cents over, for a dollar profit

o Exit Loss: Kansas goes 50 cents lower, for a loss of 50 cents.