) launching Black Sea Wheat futures contract in June
CME Group Inc. plans to bring the first local futures contract
to the Black Sea region, launching Wheat futures in the hopes of
capturing an increasingly important, but unreliable, market.
The exchange, which dominates grains trading in the US, said
Wednesday it plans to launch the contract in June, with delivery
points at Black Sea ports in Russia, Ukraine and Romania.
This breadbasket accounts for roughly 20% of the World's wheat
exports, and the US Department of Agriculture projects that will
climb to 30% in the next decade.
But the region has suffered from a lack of physical
infrastructure and government export bans, which could make the
large grains traders who are crucial to the contract's success
wary of using it, traders said.
Grain export restrictions are unheard of in the US, the
World's largest Wheat exporter, but have been commonplace in the
Russia banned grain exports for nearly a year after a historic
drought there in Y 2010 sparked concern about domestic food
Earlier this year, a Ukrainian advisory firm said many traders
had agreed to restrict exports in response to a government
request as a cold snap prompted worries about crop damage
The exchange is "reasonably comfortable" about export flow,
said CME Managing Director Tim Andriesen, in part due to its
belief that governments there recognize bans are
Potential problems with export restrictions would also be
limited by the fact the contract will have delivery points in
three different countries, he added.
"If one of those countries were to shut off exports, it
wouldn't disable the contract," Mr. Andriesen said in a
That may not prevent problems, analysts said, as long
distances between the countries would mean big differences in
transportation costs and logistics complications depending on
where the grain is coming from. In addition, any weather problem
that is severe enough to cause concern about domestic food
supplies could affect countries throughout the region.
Still, traders said the contract had a chance of success if
grain merchandisers decide it is an effective hedging tool.
The new contract comes as large grain handlers such as Archer
Daniels Midland Co. (
) and Bunge Ltd. (
) increase their presence in the region.
Last summer, ADM bought 12 grain elevators along the Danube
River in Romania to move supplies more easily to the Black
Bunge, which operates grain elevators throughout Ukraine and
Russia, bought a Ukrainian port terminal in 1-H of Y 2011, which
helped it outperform peers in the most recent quarter as exports
Cargill Inc. has invested nearly US$1-B in the region since
establishing a permanent on-the-ground presence after the fall of
the Berlin Wall, and employs nearly 3,000 people in the
All 3 companies declined to comment on the CME's new Wheat
Countries in the region have increased their Wheat standards
in an effort to win export business, traders said. Fifteen years
ago, inspectors had to check Ukrainian wheat for excess radiation
levels in the wake of the Y 1986 Chernobyl disaster. The quality
across the region has long since improved. They are becoming