The new E.U. wheat futures and options contracts are the result of in-depth consultation with customers and industry participants who want risk management tools that better reflect physical storage practices in the E.U. E.U. wheat futures and options will be denominated in euros, priced relative to the Rouen market, and will enable users to take delivery of wheat at exchange-approved warehouses in key locations across France or hold onto wheat certificates for delivery at a future date.
"Our soft red winter and hard red winter wheat futures are the global benchmarks of the physical grain industry, facilitating price discovery and a robust spread market for our customers' hedging needs around the globe," said Tim Andriesen, managing director, agricultural products, CME Group. "The addition of these new E.U. wheat contracts to our existing suite of wheat futures and options further positions CME Group and our CME Globex trading platform as the global destination for wheat trading and risk management.”
E.U. wheat futures will combine CBOT's warehouse delivery mechanisms with European trading practices to offer an efficient hedging tool to market participants. At the same time, wheat traders will benefit from arbitrage opportunities and margin offsets between E.U. wheat futures and options and the existing suite of wheat futures and options. Global wheat participants already have access to futures and options on all three North American wheat benchmarks through the CME Globex electronic trading platform.
"We were requested to be actively involved in the development of these contract specifications, and believe they will be well aligned with our hedging strategies," said Steve Campbell, head of grains for the North America region at Louis Dreyfus Company. "As a leading global merchant and processor of agricultural goods, we closely monitor international agricultural markets to effectively manage price volatility throughout the supply chain. CME Group's new E.U. wheat contracts, together with the Chicago soft red winter and KC hard red winter wheat products, will be additional valuable tools to enable liquidity, helping us to manage global wheat price volatility better across our operations."
Delivery of wheat against the contract will take place via the issuance of a warehouse certificate linked to approved warehouses located in the major wheat producing areas of France. Firms receiving certificates will have the flexibility to either re-deliver the certificates against futures; give notice of load-out of the physical wheat or hold the certificate for future load-out from the issuing warehouse in return for paying administrative fees. This will encourage the creation of a forward curve for E.U. wheat.
Each contract will represent 50 tonnes of physical E.U. wheat with quality specifications set at a minimum of 10.5% protein and 170 hagberg. The first listed month will be the December 2016 delivery month with a further seven delivery months also being made available for trading.
E.U. wheat futures and options contracts will be available for trading electronically via CME Globex Monday through Friday between 10:30 a.m. and 6:35 p.m. Paris time. E.U. wheat options will also be available for trading on the company's Chicago trading floor from 8:30 a.m. to 11:35 a.m. Chicago time.
At present, 12 warehouses have applied for approval for the delivery of physical E.U. wheat against the contract.