There’s a lot of talk of the Chicago wheat / corn spread from the technical traders. No one seems to be saying that they think wheat will go higher or corn will go lower but they are saying that the current spread is indicating we may see one of these two scenarios to play out in order to bring the spread back closer to the 5-year average which is roughly 145c/bu.
If you take out the excessive highs of wheat, say when the spread exceeds 200c/bu, the 5-year average comes back closer to 125c/bu. Either way the 5 year average spread on the nearby is much, much greater than the current spread of just 30c/bu. Chart attached. This is technical analysis; the numbers are telling you something isn’t right. Is wheat over sold probably, is corn overvalued, possibly. With a large feed wheat year, one might expect to see this spread narrow up as wheat finds feed homes displacing corn, but generally speaking, apart from Australia, the world didn’t produce a stupid amount of feed wheat in 2022. The drought in Argentina and lower projected corn acres in some of the other major producers isn’t overly bearish corn.
With US wheat futures close to a longer-term average price when taking inflation into account, one could conclude that the recent spate of bearish moves in wheat is not fundamentally driven and is now exceeding something other than technically driven as well.
What makes SRWW at Chicago even more unexplainable is the upside in both HRW and spring wheat futures overnight, someone needs to give CME SRW some antipsychotic meds in a hurry.
In other futures markets, rapeseed and canola moved higher, yes higher. Yes, I had to refresh my screen and give my eyes a rub to make sure I wasn’t seeing things. Paris put on E5.75 on the nearby, Winnipeg was +C$15.20 on the nearby. What makes this even more impressive is Chicago soybean futures were actually 18.5c/bu (AUD$10.17) lower. The move in Paris is roughly equivalent to an AUD$9.78 tick upwards.