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, 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?
