Re: wheat/corn.

["Dtrader" <dan@xxxxxxxxxxxxxxxxx>]

norm
gary bodnar's good note to the list on tuesday below


-----Original Message-----
From: Norman E. Phair <ericrogers@xxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Friday, May 21, 1999 1:23 PM
Subject: Re: wheat/corn.


:Dan;
:
:Very informative, that is if I knew what you were
:talking about. Sounds like wheat/corn 102, since I have





-----Original Message-----
From: gary bodnar <gbodnar@xxxxxxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Tuesday, May 18, 1999 7:20 PM
Subject: Seasonal wheat/corn trades low risk trade?


Hi folks
According to my SuperInvestor Files, May,June and July are a good time to do
a seasonal trade on Dec. Wheat & Corn if the ratio is 75 cents or less.. My
old monthly ratio chart on wheat/corn from 1965 to 1988 shows only few times
when the spread head south to 10-0 cents...
The chart below will show you one year worth of Dec. Spread.. as of
yesterday's ratio @
52 cents.  http://xeno.licensed.com/clyde/forecasts/Images/wheatcorn.gif

@52 cents * 50$= $2600 would be the maximum draw down per contract not bad
of a deal. According to my file, the U.S. wheat crop is ready for harvesting
in late summer. Everything else being equal, this new surge of supply to the
market will depress (or at least restrain) wheat prices. As a result,
futures prices for the contracts representing this new crop will be
relatively low. Meanwhile, because the corn harvest comes later in the year,
the corn prices should remain stable or even trend upward. Unless outside
factors (such as weather) override these pricing tendencies, the wheat/corn
spread should narrow to its seasonal low in late spring and early summer.
Then, a few months later, just as wheat prices are beginning to rise
(reflecting absorption of the new crop into the demand chain), the corn
harvest will come in and, the new supply will have the same depressant
effect on corn that wheat experienced earlier. The resulting downward
pressure on corn prices should cause the wheat/corn spread to widen in the
fall.. Recognition of this pattern, one could purchase the spread around
May, June or July with expectation of selling it around Nov..

What would be the probability of 52 cents going south to 10 cents??
Comments/suggestions are welcome.. This is not a trading recommendation..

Regards
Gary Bodnar