CME to Start European Wheat Futures in Competition With Euronext

June 20, 2016 04:30 PM
CME to Start European Wheat Futures in Competition With Euronext

CME Group Inc. will start new European wheat contracts in September, competing with Euronext, owner of the region’s benchmark grain futures.

The new futures and options contracts will begin trading on Sept. 12, be denominated in euros and priced relative to the Rouen market, Chicago-based CME said in an e-mailed statement Monday. Deliveries will take place at exchange-approved warehouses in major wheat-growing areas in France.

As owner of the Chicago Board of Trade, CME already has the world’s most active wheat market by volume. Its London-based arm, which opened in 2014, started trading cocoa futures last year and plans to list fertilizer contracts in July. CME Europe’s expansion into wheat will mean increased competition for Euronext, which manages milling-wheat contracts in Paris.

The new contracts “will be additional valuable tools to enable liquidity, helping us to manage global wheat-price volatility better,” Steve Campbell, head of grains for North America at Louis Dreyfus Co., said in the statement. The trading house was involved in the development of the contract specifications, he said.

Contract Details

Each contract will total 50 metric tons of European Union wheat, with a minimum 10.5 percent protein content and 170 hagberg level, an indicator of baking quality, CME said. The first listed month will be for December delivery, with a further seven delivery months also available.

Torrential rains that hurt French crop quality two years ago spurred Euronext to introduce new premium-quality milling-wheat contracts in 2015, but they were later suspended because of lack of trading. Additional quality requirements, including protein specifications, are due to be added to Euronext products starting in September 2017. The bourse’s current contracts have delivery points in France.

Exchanges have found it difficult to launch new contracts. CME started Black Sea wheat futures in 2012, with delivery points in Romania, Ukraine and Russia, but later suspended them because of limited interest. The bourse said in April that it would begin listing new contracts this year, shortly after Euronext announced plans for its own contracts for the region.

Twelve warehouse companies have applied for approval for deliveries against the new contract, CME said.

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