Grain Spreads: KC/Chicago Wheat

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The wheat markets started the last trading week of the year with moderate losses. This could have been the result of year end profit taking that impacted several markets, with the metals seeing the worst losses. Weekly wheat export inspections totaled 11.1M bushels which just edged out top end of estimates ranging 4-11M bu. KC and Chicago both closed lower while MGX held steady bulk of the day. I have been watching Kc vs Chicago lately as Kc finally has traded back to a premium vs Chicago and looked like a potential breakout on the chart in my view. The bulk of the US Southern Plains (KC wheat areas) remains warmer and drier over the coming days which will need to be watched after the prolonged dryness seen. I think that is one reason KC went bid vs Chicago a few weeks prior, with the rally starting at the end of November. Look for values to remain in a holding pattern short-term until we get past the low volume holiday. Below is March KC vs Chicago wheat. Today, we settled at 14.2 cents March KC over. Last yar we saw this spread stay bid until any weather threat evaporated. That tells me this spread could possibly rally 30 cents KC over at some point this winter or it moves quickly back to parity vs Chicago. While the President touted some success with Ukraine over the weekend, Russia continues to fire missiles into Ukraine in the latest series of attacks. The war in my view still feels very far from over. Weather rules here for this inter market spread deep into January.

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Sean Lusk

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