As a casual hockey fan who only pays real attention once the playoffs roll around, it’s been interesting to see the sheer number of sports betting ads, and even commentary, now that gambling on the outcome of individual games is legal in Canada.
There are many ways to bet on sports. While simply picking which team will win is common, oddsmakers will typically favour one outcome over the other, paying out more or less depending on how they think a match will go.
The point spread can also come into play when teams are deemed to be unevenly matched. If Team A is considered that much better than Team B, the underdog could lose the game but still be considered the winner from a gambling standpoint if they cover the spread. Spreading is a concept in agricultural markets as well, and spreads are often a feature of trade.
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Canola calendar spreads
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Typically in a futures market, the nearby futures months are the cheapest with prices rising as you move to the deferred contracts due to the costs of storing grain and other uncertainties. Markets are said to be at an inverse when those carrying charges are ignored and the nearby contracts are higher than the further out months.
That’s currently the case in canola, with the May/July spread moving from near even money in February to over $30 per tonne. That movement in the futures implies there is strong demand for canola now, rather than waiting.
However, the latest activity has more to do with speculators buying back short positions than anything fundamental. The July contract is also trading at a sizeable premium to the new-crop November contract, but that premium had been higher earlier in April. Watching the spread relationship between those two contracts will be important through the growing season, as attention shifts to prospects for 2023 production.
Soybean/corn spread
With seeding underway in the United States, the soybean/corn spread is being followed closely by Chicago traders. Soybeans always trade at a premium to corn, but that ratio can rise and fall. If the spread narrows too much, some of the area originally intended for corn may shift to soybeans instead and vice versa.
Wheat spreads
The three U.S. wheat contracts have their own spread relationship, with Minneapolis spring wheat usually the highest price, followed by Kansas City hard red winter wheat and then Chicago soft wheat.
The two hard wheats were trading near even money in April, as drought concerns in the southern Plains boosted Kansas prices and the late melt to the north raised concerns over spring wheat seeding.
Meanwhile, Chicago lagged. Chicago may be the cheapest wheat at present, but it also has the largest trading volumes and could drag on the other markets if participants decide to get those spreads back in line with more normal levels. However, all bets are off on where things will go now, with the Russia/Ukraine conflict throwing a wrench in any plans for picking an odds-on favourite.
