Canada: ICE Futures Canada creates three new grain contracts in anticipation of the end of CWB's monopoly
ICE Futures Canada (formerly the Winnipeg Commodity Exchange) has started work on creating three new contracts - one for spring wheat, another for durum and a revamped contract for barley - in anticipation of the end of the Canadian Wheat Board's monopoly, PortageOnline reported on May, 26.
Agriculture Minister Gerry Ritz has said he's aiming to end the CWB's single desk selling authority for the 2012-13 crop year, which starts August 1st, 2012.
"I think farmers will find the setup of these new contracts to be quite familiar because we're following a very similar model to our canola contract," explains ICE Canada President and CEO Brad Vannan.
Vannan says they hope to launch the contracts well before the August 2012 target set by Ritz.
"We'd prefer to have our contracts in place and ready to trade well in advance of that, and ready to launch when we have clear sight that there will be an end to the Wheat Board monopoly," he says.
He says he's not concerned about having to compete against the Hard Red Spring Wheat contract traded on the Minneapolis Grain Exchange.
"I envision that our contract will be in Canadian dollars and in metric tonnes, and will have a delivery location in western Canada, so it'll be very relevant to western Canadian farmers, and provide a very transparent market as a result," he says. "There are three active wheat contracts in the U.S. marketplace, and they do compete somewhat, but they also compliment each other. I feel our wheat contract will be complimentary to the wheat contracts that already exist."
Vannan says they're also making significant changes to the current Western Barley contract.
"We have to have some discussions with the trade, but what I envision is a contract that would be relevant for both the domestic and export markets," he says, noting the lack of activity in Western Barley futures trade over the last few years was partly due to large feed supplies. "As a result there hasn't been a significant amount of risk in the domestic feed market, and when there's not a lot of risk, futures contracts become a less valuable tool. As we open up to a global marketplace, if there is a surplus supply of feed in western Canada, and there's several participants actively looking for product, I can see that there will be competition for those feedgrains from offshore. That not only opens up our market to new buyers, but would also require the domestic marketplace to look to make more arrangements for the supply of their feedgrain needs."
The task of creating the new contracts will belong to the ICE Futures Canada contract committee.
"I've been in lots of discussion with industry over the past week, trying to get everybody's feel for what they feel their needs are," he says. "We'll be calling a meeting of the contract committee, whose job will be to look at appointing various sub-committees to work on the specifics surrounding each of our proposed contracts."
"We're looking forward to this opportunity. We think we'll be able to put forward some good quality contracts that will allow for good price discovery and market transparency for western Canada," says Vannan.
27 May, 2011
