Canadian grain futures fade away

WINNIPEG — “If you build it, they won’t always come” turned out to be the case with ICE Futures Canada’s grain contracts, which were finally delisted today after years of little to no activity.

Milling wheat and durum futures were introduced by ICE Canada in 2012 in response to the end of the Canadian Wheat Board’s single desk powers for marketing those crops but last saw any activity in 2014. Barley futures were around in one form or another through the original Winnipeg Grain Exchange since 1904 but had not seen any trade since 2016.

On the recommendation of the contract committee, ICE Canada announced the decision to delist the three grain contracts in a notice to participants yesterday.

“The grains contracts were promoted in an ongoing way, but it’s been almost a year since the barley contract traded,” said Brad Vannan, president and chief operation officer of ICE Futures Canada.

Of all three grain contracts, barley saw the most traction, “albeit limited,” he added.

The contracts were designed to be similar to ICE Canada’s well used canola futures but were unable to gather enough liquidity to provide a valuable hedge.

“It’s too bad that those futures didn’t take off.… We just couldn’t build the momentum on it,” said Jerry Klassen, manager of Canadian operations with Swiss-based GAP S.A. Grains and Products in Winnipeg.

He said the lack of the futures market was especially bad for farmers, but said there were other options for price discovery.

Klassen said the advent of mass communication, such as text messaging and online price quotes, meant farmers were able to access pricing options directly from grain buyers on a regular basis.

The relatively small number of those players handling a large percentage of the Western Canadian wheat and durum market was likely a factor in the loss of the futures contracts. Klassen, who trades durum into Europe, said durum was more of a specialty crop with most of the business taking place directly between buyers and sellers without the need for a futures market.

For spring wheat, Klassen said the argument could be made that there was likely only enough production in North America for one futures contract with the already established Minneapolis market offering stiff competition for the upstart Canadian contracts.

“There’s a certain critical mass that any futures contract needs to be viable, and it was getting to the point that barley wasn’t representing a large enough market,” said Vannan on the loss of the barley contract.

“Durum was always a bit of a faint hope.”

Milling wheat had the most potential as a futures contract, “but it also had the most competition,” he added, pointing to the Minneapolis Grain Exchange spring wheat futures.

Vannan said ICE Canada was always on the lookout for new opportunities but would need to see a critical mass of support from the trade before moving forward with another new offering.

“It’s not a case of ‘build it and they will come,’ it’s a case of there has to be real demand for that type of product,” said Vannan.

“The exchange is just a vehicle for the contracts. It’s up to the marketplace to show that they’re willing to support what would be launched.”

As far as the remaining canola futures and options are concerned, “our canola contract continues to grow,” said Vannan, noting that the canola market is performing very well with good convergence between the futures and cash on delivery months.

“The trade has continued confidence in the canola contract because it is functioning at all levels,” said Vannan.

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  • ed

    Surprise, surprise! Predicted……This has been quite a disaster since the CWB got lifted from Western Canadian farmers. Without being tapped into the global market the farmer is basically screwed. They are selling wheat at less than one half of the value that the CWB would have been gwtting them for it right now, which is a $4 Billion annual loss on that one crop alone. How is that working for them? No well. They grow magic beans now which is a way of exporting even more of their lands non renewable micro nutrients. How sweet is that for big companies. Very! It is amazing to watch farmers run around in circles attempting to make ends meet and burning off their equity and soil fertility at the same time while they run up additional debt. It is a quick study and needs to be documented through the writing of several dozen books. Farmers wouldn’t read them, but city folks sure would.

    • Bruce

      I am with you ed with the single desk Canadian Wheat Board.

      • ed

        Thank you for that. You are obviously a very informed individual. The Board or something like that will eventually need to be reinstated and it will most likely be the tax payers of the land and a blend of less intellectually challenged politicians that will lead the charge. It will not be farmers and most certainly not farm groups that will have as much to do with it. Best if they put more grains on it to strengthen prices even more than if only wheat, barley and oats. Don’t hold your breath waiting for this one as it will take far more pain and tax payer abuse before this ever gets contemplated.

    • Happy Farmer

      Ed,
      I can’t remember the CWB being “lifted” from farmers. As i remember, the government only opened the door for competition. If the CWB was as glorious as you say, competition should have posed very little threat to them. But, apparently the CWB was only good without competition. Free enterprise, love it.

      There is absolutely no way to know what prices we would be getting if the CWB was still the only marketing option we had. You are only speculating.

      • Harold

        Competition is when you have a separate entity competing with another separate entity within the same market place. A joint ownership in a single entity is not competition. 51% is foreign ownership of a single entity CWB which has been “lifted” from 100% leaving 49% remaining; G3. Your recollection of events is absent of facts. Competition is when the CWB remains 100% owned and they compete with another fully owned entity in the same marketplace. Simply, the act of buying the majority shares (51%) in a corporation is not an act of competing against the corporation; it is an act to control it and profit by it.
        There is no way to determine that you are getting the best value in todays market in the absence of the CWB, so you are merely speculating as well.

      • ed

        … The first published prices in our “free market” (code for license to steal) environment showed the almost instant drop between delivery of 89-93% of the port price under the farmers CWB price discovery cartel to the farm gate to as low as 40% of the published port prices being delivered to the farm gate. The anwser to that was to remove all transparency and quit publishing the port prices. This is what every single company did and you don’t really have to spend much time wondering why. That is also why immediately well respected university economists produced studies demonstrating appropriately a $4 Billion dollar loss for Western Canadian farmers at their farm gates. Not too shabby if you are a grain company if I don’t say so myself. Check Mate.

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