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CME gives traders new hedging tool

Brazil overtook the U.S. as the top soybean exporter in the 2012-13 season

By Isis Almeida and Megan Durisin

CME Group Inc. plans to start Brazilian soybean futures with the country’s B3 exchange, giving traders a new hedging tool as the U.S.-China trade war disrupts the global flow of beans, people familiar with the matter said.

The contract for soybeans loaded at the port of Santos, Brazil’s biggest, would be cash-settled, according to the people, who asked not to be identified because the plan hasn’t been announced. Futures will be based on assessments by a price-reporting agency, most likely S&P Global Platts, the people said.

Brazil has become a powerhouse in soybeans and overtook the U.S. as the top exporter in the 2012-13 season. Its dominance grew in the past year as the U.S.-China trade spat prompted Chinese buyers to turn to Brazilian supplies. Price dislocations have also boosted the need for new hedging tools as benchmark futures traded in Chicago are for beans delivered in the U.S.

Both B3 and CME declined to comment.

CME, which also owns benchmark futures for corn and wheat, had previously confirmed it was considering starting a Brazilian soybean contract. In May, Chief Executive Officer Terry Duffy said the bourse was working on developing risk-management tools for the Brazilian market and that he wanted to ensure changes in trade flows didn’t skew prices.

The soybean contract would extend CME’s suite of cash-settled products, which also include Black Sea wheat, corn and Ukrainian sunflower oil. Cash-settled contracts are gaining popularity as agriculture follows the path of energy markets, where thousands of contracts are already based on assessments from price-reporting agencies.

--With assistance from Fabiana Batista and James Attwood.
To contact the reporters on this story:
Isis Almeida in Chicago at ialmeida3@bloomberg.net;
Megan Durisin in London at mdurisin1@bloomberg.net
To contact the editors responsible for this story:
Nicholas Larkin, Liezel Hill
© 2019 Bloomberg L.P.
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