When it comes to the CME's Variable Storage Rate program for wheat, I'm for increasing the storage rate for both winter markets and leaving them at the higher levels.
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At the current official storage rate, the July-September HRW futures spread is testing its 100% calculated full commercial carry level.
Commodity Bulletin: From crude oil to coffee, this FREE newsletter is for industry pros and rookies alike The National SRW Wheat Index at the end of February indicated Q3 available stocks-to-use were at the largest level since at least 2020.
Over the years, I’ve had a number of discussions about the CME’s Variable Storage Rate (VSR) program in wheat. My view has been that it was unnecessary, and that changing the storage rate just so futures spreads don’t cover as much calculated storage rate can be viewed as misleading. For example, if a spread consistently covers 80% calculated full commercial carry, telling the world the US has too much supply of that class of wheat on hand, changing the storage rate so the spread covers a smaller percent doesn’t actually change the real supply and demand situation. It just makes it look less bearish. Many of my discussions were with Angie Setzer, and she tended to make a strong argument for VSR based on actual cash markets. I will say that my take on the idea hasn’t changed, but I will add that official storage rates for wheat should be increased and set semi-permanently. This process of possibly raising and lowering does not accomplish anything.
