CME Volume Heavily Down
CME Group announced Tuesday that November 2008 trading volume averaged 10.5 million contracts per day - a hefty 29-percent drop from November 2007, based on combined Chicago Mercantiel Exchange (CME), Chicago Board of Trade (CBOT) and New York Mercantile Exchange (NYMEX) volumes.
Trading in commodity futures - including corn, wheat, soybeans, livestock and dairy - averaged 724,000 contracts per day, down 12% from year-ago levels, CME Group stated.
Coincidence that isn't it? The likes of Golden Sacks exit the market and it falls out of bed.
Cargill, Bunge Want Further Changes To CBOT Wheat Contract
Major grain players including Cargill and Bunge continue to say that the Chicago Board of Trade needs to improve on a plan to narrow a gap between wheat futures and
cash prices.
"We have serious concerns that the steps taken will not effectively address and correct the problem," Cargill said in a statement submitted to the CFTC.
Both company's are unhappy about the continued divergence between CBOT futures and cash prices.
The difference has been $2 a bushel or more in recent weeks, with futures trading at around $6 a bushel this week and cash prices quoted near $4 at some locations.
The CME Group, which owns the CBOT, proposed several changes last month to the wheat contracts specifications, designed they say, to improve convergence. The changes included tinkering with storage charges and contract specifications, but did little to flush out spec long-holders.
Bunge agreed saying that "these changes alone are not likely to achieve the convergence sought by many commercial market participants."
It is of course no surprise that the CME want as much spec money in the market as possible. What is surprising is that futures and cash prices of US wheat seem to refuse to converge despite so many spec longs exiting the markets in recent weeks.
CME Wheat Tinkering Just A Bit Of Window Dressing
The CME have, not surprisingly, "bottled it" big time in my opinion with their lightweight proposals to tinker with the CBOT wheat contract.
A bit of messing about with delivery points, storage rates and contract specifications is not going to help futures contracts converge with cash prices very much, if at all.
The loophole that allows non-commercials to take unlimited positions is still there. Plenty large enough to drive a bus through any time they like.
At the end of the day the CME want volume, pure and simple. The large spec funds provide it. More volume equals more revenue. What, swap market stability for record volumes? You must be mad! Why would they want to kill the golden goose when they can just have it resprayed?
CME Proposes Changes To CBOT Wheat Contract
In a half-hearted sop to appease traders and farmers upset about the recent lack of convergence between CBOT wheat futures and cash wheat the CME announced Friday that it was proposing to change the terms of the CBOT wheat contract.
CME, parent of the CBOT, has proposed to industry regulator the Commodity Futures Trading Commission that storage rates be increased. It also seeks to add delivery points and lower the amount of vomitoxin in delivered supplies so that futures and cash prices come together, or converge at futures expiration it said.
The price difference between the futures and cash markets has now widened to more than $2 a bushel at some U.S. Midwest locations. That spread has historically been much smaller.
Many grain traders had hoped for the exchange to impose "forced load-out," compelling buyers or "longs" of futures contracts to take physical delivery. Those ideas continue to be floated, along with options to downsize the enormous influence of Wall Street investment money.
Traders note that "passive" investors such as commodity index funds, which typically buy and hold futures, currently hold a net long, or bought, position in CBOT wheat futures representing nearly 50 percent of the open interest in the contract.
The exchange is recommending storage rates be increased to 8 cents per bushel per month from 5 cents for the NEXT July-November period, ie July 2009 onwards.
CME is also proposing expanding delivery points to include Midwest rail and barge terminals. Current delivery points are Toledo, Ohio, Chicago-area terminals and St. Louis.
Additionally, the CME proposed lowering the maximum allowable vomitoxin in soft red winter wheat delivered against the contract to 2 parts per million, from 3 ppm, starting with the September 2011 contract.
The spec funds will be quaking in their boots won't they?
CME to increase daily limits
CME Group (Chicago Board of Trade as we all still call it) said the CFTC have approved a PERMANENT expansion of daily limits for corn to 30 cents and soybeans to 70 cents, and soyoil to 2.5 cents, effective March 28.
