I have a fairly general question regarding wheat futures and the wheat market.
With and understanding of the effects of carry costs and convenience yields, I have a grasp (just) on the idea of backwardation and contango. These concepts seem easiest to understand when one ignores the cyclical nature of the underling and assumes constant demand and supply over a period. (oil seems a commonly used example although I appreciate the demand cycles and volatility)
Where I am struggling is applying this theory to the wheat market which is obviously fairly cyclical. At the moment there seems to be a large degree of backwardation in the wheat futures market potentially giving a large positive carry and I guess some downside protection to a fall in the price of wheat. Is this all due to the supply nature of the crop? Can I feasibly roll into the next contract each month taking that yield?
If someone is has knowledge in this area and has time to fill in the gaps and the risks of this sort of thinking with a cyclical crop. Or correct anything I have posted.
Also if anyone knows where to get a good global annual demand and supply chart showing the calendar months of peak demand and supply it would be much appreciated.
Thanks in advance for any feedback.