Grain Spreads: Wheat vs Corn

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Commentary

Corn, soybeans, and wheat opened the week’s trade under pressure although losses were minimal compared to the indices. The big story in the market to start the week was the escalating geopolitical tensions between the United States and the European Union over Greenland. More back and fill action for the wheat complex as values gave back the bulk of gains seen Friday in what was a quiet day of trade to start the short week. Chicago wheat led the complex lower followed by KC and then Spring wheat. The action today prompted thoughts that a correction in the wheat/corn spreads were the main driver after spreads have rallied 25-30 cents in wheats favor from recent lows. Some prominent weather groups published a story about the extreme cold being seen across the Midwest with 1/3 of the US SRW crop seeing sub-freezing temps now through the weekend. Snow cover remains limited in these areas with winterkill a threat across IL/IN/OH. Markets were immune to such a threat today but let’s see how things play out. With funds short 100K of Chicago wheat, I wonder if wheat vs corn should be looked at moving forward. With the USDA whacking any potential corn rally last week amid a potential weather threat, I posit that this break in the spread today is worth buying. Chart below. But if one can buy the March wheat vs March corn on a pullback around 80 cents wheat over, The spread may be worth a shot. It settled at 86 cents today. 

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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