On Friday CME Group, the world's largest derivatives exchange, submitted changes to its regulator for the benchmark wheat futures contract. The changes, which call for seasonally increased storage fees and additional delivery points, have been recommended to improve convergence between futures and cash prices at contract expiration.
The Commodity Futures Trading Commission (CFTC) must approve any contract changes and proposed implementation schedule pertaining to the grain and oilseed listings at CME Group if the changes are applied to contract months with open interest.
The recommendations are based on input from market participants, including commercial interests, grain elevators, individual traders, proprietary trading firms and others.
Changes to the storage rates include introducing seasonal premium charges to be increased during the period from July through November to 8 cents per bushel per month. During the remainder of the crop year from December through June, the exchange is recommending that premium charges remain at their current level of 5 cents per bushel per month.
Three additional delivery territories are also being recommended. The delivery areas would include shuttle train loading facilities in a 12-county area of northwest Ohio; barge loading facilities on the Ohio River from Cincinnati to the Mississippi River; and barge loading facilities on the Mississippi River from below St. Louis to Memphis. In addition, northwest Ohio locations will be added at a 20 cent per bushel discount; Ohio River locations at par; and Mississippi River locations at a 20 cent per bushel premium.
Finally, the exchange is recommending that the vomitoxin level for par delivery be lowered from three parts per million (ppm) to two ppm. Wheat containing three ppm of vomitoxin will continue to be deliverable at a 12 cent per bushel discount and wheat containing four ppm of vomitoxin will continue to be deliverable at a 24 cent per bushel discount.
The seasonal storage rate and additional delivery locations are proposed to be implemented beginning with the July 2009 contract month and the lower vomitoxin level will be implemented with the September 2011 contract month.