March 26, 2012

CME launches futures trading in Black Sea wheat

The Chicago Material Exchange, CME Group, the biggest global player in the Goods and Raw materials Exchange, has launched futures trading in Black Sea wheat which is an important step for the Russian wheat market, according to experts.

The new financial instrument has simplified Russia's wheat trade on the international markets considerably, and in essence, futures -goods selling under standard contracts, will set down the norms for exporters and the purchasers, thus helping to reduce the risks, says Alexander Korbut, vice president of the Russian Grain Union, speaking in an interview with the VOR.

Under futures trading, all the indexes of the trade in any given commodity are specified and backed by a definition of its characteristics. Such contracts are standardised according to the demands of the Chicago Exchange. Futures contracts help in risk Insurance, because it is a transparent system. There are clear-cut orientations relating to prices and timescale. The forecasts help to improve the investment attractiveness of the Russian grain market. The global players can now operate under the normal standards known to them.

Until now, the price of the Russian grain was not clearly indicated, and it fluctuated in the online regime. That problem will be solved by the new futures launched by the global player.

Under the existing classification, the Black Sea wheat is no t only Russian grain from its Southern regions, but also Ukrainian and Kazakh. The three countries have a combined share of more than 25% of the grain sold on the world markets. Experts predict an increase in that figure. The high interest by the world's leading players in the grain sector is understandable, says Andrei Sizov.

"It is difficult to ignore the Russian and Black Sea wheat market, in view of the fact that in the past decade, the region exported millions of tonnes of grain to the world markets. Now that the global markets are stabilising, the Black Sea region is expected to become more active, and Chicago seems to have read the situation quite well.

The Chicago Material Exchange is a member of the Chicago Group, which is the most authoritative player in the trade in agricultural goods. It also owns the Chicago Trade Chamber and the New York Trade-Raw Material Exchange.

Experts warn that speculations could tarnish the promising futures trading in black sea wheat, but that the start of the trading has more plusses than minuses. The CME Group says that it plans to begin futures trading in the Black Sea wheat in the next few months.