The grain markets showed strength on Tuesday, with March Wheat (ZWH27) slightly outperforming March Corn (ZCH27) by half a cent. This performance kept the March Wheat-Corn spread (ZWH27-ZCH27) above both its 14-day and 21-day moving averages, a position it settled into for the first time since September 2nd.
The Corn market's recent gains may be attributed to excessive rain and wet conditions slowing down the current harvest. Meanwhile, the Wheat market's strength could be due to a slower-than-usual planting rate for U.S. winter wheat.
Rich Moran, a senior commodities broker at Walsh Trading, suggests that the delays in winter wheat planting might have a more significant impact than the delays in corn harvesting. He believes the price of Wheat relative to Corn may continue to rise, making the ZWH27-ZCH27 spread a potentially good buy, especially if it remains above the moving averages.
Moran recommends buying the ZWH27-ZCH27 spread at 191, which is 4¼ cents below Tuesday’s settlement and 2 to 4½ cents above the moving averages. The suggested risk is 20 cents (price of 171) or $1,000 per spread, with a target of 40 cents (price of 231) or $2,000 per spread, plus fees and commissions.