New Chicago spring wheat futures make thin trade thinner

Glacier FarmMedia | MarketsFarm — The CME Group’s new Chicago spring wheat futures may be diluting an already thin market, says analyst Tom Lilja of Progressive Ag in Fargo, North Dakota.

“You’re just going to have more speculative moves pushing that market around,” Lilja said.

For example, the MIAX Futures Exchange-owned Minneapolis spring wheat futures saw a little more than 5,500 July contracts traded on May 8. That same session, trading of the CME Group’s Chicago soft winter wheat exceeded 53,500 July contracts and almost 27,500 for its July Kansas City soft red winter wheat.

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Meanwhile that day, the total volume of trading in Chicago spring wheat was 25. In about a month of activity, it’s best day was May 5 at 276 contracts.

While volumes have been low, CME spokesperson Anne Burke said in an email the new spring wheat futures and options were still developing, adding “we are pleased with the early interest we’ve seen.”

John Ricci, managing director and global head agricultural products for the CME Group, explained the reason behind the new spring wheat futures.

“Market participants will now be able to manage price risk across every major type of wheat on one exchange and all cleared in a single clearing house,” Ricci said in a statement.

Lilja referenced CME’s previous venture into cattle futures, in which the small volumes led to it being pushed around quite a bit. That led to overnight activity being suspended and trading was restricted to only the daytime.

“I can foresee something like that happening with these thinner volume contracts,” Lilja said.

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