February 13, 2008

Kansas and Minneapolis grain exchanges expands wheat trading limits

The Kansas City Board of Trade and Minneapolis Grain Exchange on Wednesday (February 13, 2008) will raise daily trading limits for wheat futures to 90 cents from 60 cents, exchange officials said Tuesday.

The daily trading limit at the Chicago Board of Trade will remain 60 cents, said a spokeswoman for the CME Group Inc. (CME).

The three exchanges late Friday increased their daily limits to 60 cents from 30 cents and said they would increase limits by another 50 percent if at least two contract months within a crop year closed at limit bid or offer. That was the case at the KCBT and MGE, exchange officials said.

Daily price limits will revert back to 60 cents after no wheat futures contract month closes limit bid or limit offer for three consecutive business days, according to the exchanges.

At the CBOT, December 2008 and March 2008 wheat, which are both in the new-crop year, settled limit down, 60 cents lower. However, there were closing offers above the limit, CME spokeswoman Mary Haffenberg said.

"If the settlement price is at the limit, then you'd think it should go expand the limits," Haffenberg said. "But the closing offer was off the limit, thus no expanded limits."

Uneven limits at the exchanges could potentially cause problems for some traders, said Louise Gartner, analyst for Spectrum Commodities. If KCBT wheat futures fall more than 60 cents, for example, "all these guys that are spread long Kansas City, short Chicago, they're going to get fleeced," she said.

"A lot of spreads are set up that way where they're long the quality wheat and short the Chicago," Gartner said.

All three exchanges Friday raised the limits to 60 cents from 30 cents following a series of limit-up moves last week. Wheat futures were surging on leadership from the MGE, where solid demand for high-protein spring wheat and short supplies supported sharp gains.