January 23, 2014

 

European exchange to launch rapeseed meal, oil futures in 2014

 

 

In order to offer a full suite of rapeseed derivatives to a growing market spanning food, livestock and biofuel sectors, Euronext will this year launch futures and options for rapeseed meal and oil, the European exchange said.

 

Euronext already offers rapeseed futures that have become its second-largest agricultural derivatives market in Paris, after milling wheat. It would be the first exchange to cover all the main products in the rapeseed complex.

 

This marks Euronext's second attempt to develop rapeseed oil futures, after weak demand put an end to the market only a year following a first launch in 2007. The exchange said demand across the rapeseed complex was much stronger now.

 

"World production of rapeseed has grown by over 80% in the last 10 years; there has been significant growth in the use of rape meal in animal food and an increase in the use of edible oil," Lee Hodgkinson, head of Euronext's Markets and Global Sales, was quoted as saying in a statement.

 

In the second half of the year, the exchange expects to launch trading after finalising the specifications of the contracts, Lionel Porte, senior manager commodity derivatives product development at Euronext, said.

 

European traders were sceptical about short-term prospects given the failure of the previous rapeseed oil contract and the difficulty of getting new agricultural futures off the ground.

 

Despite its strong growth, the existing rapeseed futures remained a relatively shallow market compared to wheat and driven by a small number of big operators, traders noted.

 

Since the demise of the earlier rapeseed oil contract, Euronext had responded to interest from animal feed makers and to the maturing of the mostly rapeseed-based European biodiesel sector, Porte said.

 

It also hopes to attract rapeseed operators from outside Europe who often hedge against soy derivatives in Chicago, he said, citing rapeseed exporters in Canada and Australia.

 

Contract specifications such as delivery points would aim to reflect the physical markets, Porte added, noting Paris rapeseed futures were initially quoted in German marks in the 1990s in view of the importance of Germany's oilseed sector.

 

Over the past five years, the existing rapeseed futures have seen growth of 67% in traded volumes and in 2013 an equivalent of 93 million tonnes of rapeseed was traded, Euronext said, representing more than four times annual rapeseed production in the EU.

 

Euronext's Paris-based agricultural futures are part of continental European activities that International Currency Exchange (ICE) plans to spin off in a share listing after its takeover of New York Stock Exchange (NYSE) Euronext last year.