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wglassfo
Veteran Contributor

Old crop - new crop spread

I have basis contracts over Sept 14 for July/Aug 14 delivers

I have watched the July month slowly increase in value and now exceeds the Sept

Approx. 7 cent in the last 30 plus days.

 Have not watched this spread before, so I have no knowlege of what it can do,

 I think I should, except it only does it's thing once a yr.

Does anybody know the historical relationship of this spread.

I see the Gann charts are no longer available, at least I can't find thm

Is this spread a demand/supply thing which could be any reason, one or the other.

If so then that would be spec and notusing historical evidence for a better basis

Or: does Sept gradually lose to July as harvest time pressure starts to come closer

In the short time I have watched [I month] I have lost 7 cent to the July

The last trading day for the July month is July 14, which would be th end of this spread, but close enough

Can weather or anything random effect this spread or is there any historical info about this spread

If that spread went to 20 cent July over Sept that would be 1000.00/contract that I could have added to my basis

If July loses for some reason [that I don't know why] then I would be ebst adviced to leave this spread alone

By my reading of the margin charts the margin/main is very low

Anybody got a comment

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2 Replies
sw363535
Honored Advisor

Re: Old crop - new crop spread

I think it will respond like that in a tight supply year.

September is late enough to be affected by the new crop being harvested as far north as southern Ks.

July delivery is usually our basis peek.  After that the buyer can "diet" into new crop production, early harvest needs to be moved to make room and a lot of cash needs are met with early harvest corn. ------- its available on arrival.

 

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wglassfo
Veteran Contributor

Re: Old crop - new crop spread

I suppose the next question might be, would we have a tight or surplus supply in July/Aug

Woder how many are holding corn for the summer market-hoping for increased demand

If that supply, held in welded shut bins gets dumped onto the summer market, then we have over supply later in the season

Ending stocks would indicate we have enough, but the market needs supply every day, or it won't work

Would 5.00 corn bring lots of corn into the market early and lessen the later summer supply

If that happens, and assuming the market uses the corn, then July should keep on gaining over Sept

Problem is the northern tier have such a terrible basis, I would imagine they hold for basis improvement

I think that is where the supply of corn will come from in the summer months, thus 5.00 cash may be the most,  the buyers will have to pay, exceept in corn dfecit areas with transportation being the difference.

I agree with the idea that southern corn harvest will tend to lower Sept, on most any yr.

I think maybe I should do the spread and if it shows signs of reversing, I can always back out of my postion

Nothig risked=no gain

It's the losses I try to avoid, if it be high risk

Just doing somethig with no good reason can end up in a spec position, which isn't marketeting, hedging or anything but spec

Any other thoughts are welcome and tks for the post/ideas

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