CME Group Black Sea Grain Futures Create Buzz Ahead of the Conference

12.04.2018

CME Group’s new Black Sea Grain contracts are creating a stir in the market ahead of UkrAgroConsult’s ‘Black Sea Grain’ conference. Traders of Black Sea Grain can now hedge physical business up to a year out.

Black Sea Wheat futures have open interest going out to Feb 2019, totalling over 600,000 tonnes as of early April. At the same time Black Sea Corn futures open interest is 60,000 tonnes, with open interest out to November 2018.

‘The (Black Sea) market is now developed and sophisticated enough to understand and trade these products’ says Alegrow trader Yuriy Fefilov. Alegrow is a Swiss-based trading company that connects agricultural producers of Russia, Ukraine and other CIS countries with industrial grain consumers.

‘Now we have a product that gives us an opportunity to hedge, even into the longer-term,’ says Fefilov. ‘We can establish a position where we might not be able to in the physical market. That is a good sign of development.’

‘It’s a crystal-clear standardized contract, and reduces the work around counterparty risk,’ says Victor Petzold of Ameropa, a Swiss, privately owned international agri-business. Petzold points to the difficulty in negotiating the finer parts of cash contracts.

‘The Black Sea Corn is not so liquid yet, but as long as it follows cash prices, it’s a good hedge,’ adds Petzold.  ‘As most of the old (Ukrainian cash corn) has already been traded we haven’t much liquidity yet but it should improve for new crop’.

Both contracts were launched in December 2017, basis Platts price assessments. Final contract settlements are basis a monthly average of the Platt’s Russian Wheat 12.5% FOB Black Sea Deep Water and Ukrainian Corn FOB Black Sea price assessments.

CME Group is the world’s largest and most diverse exchange, and is also home to CBOT corn, SRW, HRW, soybean, soybean oil futures. CME Group also lists a cash-settled futures contract basis Platt’s APW Wheat FOB Australia. This allows for arbitrage opportunities and margin offsets basis the new Black Sea contracts.

For more information www.cmegroup.com/blacksea

 

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