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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