Our fragile free markets are snowflakes that need a safe space

Never has it been so obvious how terribly fragile and prone to melting our free and open markets are today.

Winnipeg’s futures markets for barley, durum and spring wheat have been disbanded, after being abandoned by market players over the past few years. The remnants were swept out and mopped up last week, with the Intercontinental Exchange’s Canadian office informing the market that the three grain contracts were being immediately delisted.

That’s that for ICE’s attempts to create post-Canadian Wheat Board hedging and price discovery through futures. This is the end to the hope of many farmers and grain industry players that an open public market for Western Canadian cereal grains be engendered through a vibrant derivatives market. It’s a sad ending for one contract, barley, that had been trading for over a century. It’s a capitulation of the exchange’s hopes that it could fill one of the voids left by the CWB.

More than anything the delisting of the contracts is evidence of how challenging it is to create a free public market, or keep an existing one alive. There are lots of reasons these particular contracts died, and some of them are good reasons. It’s not necessarily a tragedy that these markets are gone because farmers, the market and industry have all migrated and seeped into other forms of price discovery, marketing and hedging. Futures is far from the only way to discover prices or hedge risk, and the thousands of people who make up the market have decided they’d rather use other methods.

But there’s no question that futures are probably our best and most trustworthy form of discovering what the actual underlying price for a commodity is on any given day, and that not having futures for various crops means prices drift into a murky zone of poor information, rumours and claims.

ICE failed here, but it worked hard to try to succeed. I was around all sorts of meetings in the first couple of winters after the CWB’s monopoly was broken, and I saw ICE staff talking to anybody who would listen about what they were planning and what they were doing. They threw a lot of effort into these contracts.

It can’t be nice for them to have to announce that these ones are dead. They’ve had to do that with oats, flax and peas in the past and this shows that the challenge to futures markets remains as intense as ever, with success far more rare than failure. Futures exchanges around the world have been struggling to survive, as a wave of consolidation and new forms of digital trading sweep through the world’s commodity markets like a November gale.

Our culture is filled with invective and accusations about “snowflakes” and “fragility,” from righties and lefties criticizing each other, but maybe the one place that truly needs a “safe space” is our small collection of free and open futures markets, because it’s a pretty harsh environment out there, and it’s harder to just survive than shatter or melt.

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