Grain Basket Spread: The Entry Signal For the Late 2016 Spread Was Triggered

The Grain Basket Spread

Today the IMC blog entered a long position in what we call the Grain Basket spread. This is the difference between soybeans and the sum of wheat and corn.

The position would have been initiated by purchasing one 5,000 bushel November 2016 soybean contract at $9.70 3/4, shorting one 5,000 bushel December 2016 wheat contract at $5.95 1/2, and shorting one 5,000 bushel December 2016 corn contract at $4.36 3/4. Since the sum of the wheat and the corn is $10.32 1/4, the spread was purchased at a price of -61 1/2 cents (premium the sum of the wheat and corn).

Nov-Dec 2016 Grain Basket spread daily

Nov-Dec 2016 Grain Basket spread daily

Initially, the exit criteria it to bail out on a two-day close below -$1.07 3/4. This is a nickel below the June 30th contract low. If the Nov-Dec 2016 Grain Basket spread gets back up near the ‘even money’ level where the price of beans is equal to the sum of the wheat and corn we should have room to raise the exit level and lock in a profit.

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