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Mill quality HRW Wheat basis bumped higher.
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zenfarm
Posted 1/18/2017 07:53 (#5775953 - in reply to #5775770)
Subject: RE: Mill quality HRW Wheat basis bumped higher.


South central kansas

Rather than saying KSU needs to come up higher protein wheat, you need to found out why there is non convergence in the KC wheat contract.

From the article.

"The fact that the market is paying a dollar premium for number 1 wheat with 12% protein is not relevant to the non-convergence issue. The futures contract is trading number 2 wheat with 11 percent protein. Without convergence, it is difficult to tell exactly what the price of wheat is. Perhaps 12% protein wheat would be trading at $2 over futures, if futures prices were effectively discovering price. That will not occur when there is no method to arbitrage the market. If the CME does want to adjust the storage rate as we have suggested then expand the delivery. Because there is a finite amount of storage at current rates, then creating
expanded delivery by allowing the shorts to choose cash settlement would create effective arbitrage."

 

http://agmanager.info/critics-continue-argue-low-quality-hrw-wheat-caused-non-convergence



Edited by zenfarm 1/18/2017 08:07
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