Winnipeg’s 114-year futures-trading existence is ending much the way the Roman and British empires disappeared: with some nostalgia and regrets, but no panic, and an acceptance that its time was done.
Most will never recognize it has happened.
Farmers probably won’t be worse off after the Intercontinental Exchange, if it gets needed regulatory approval, takes the canola contract down to its New York core and closes the Canadian trading operations this summer.
For farmers, where the canola contract resides is irrelevant because it’s just an electronic listing that can be accessed and hosted anywhere. All that matters for farmers’ risk management is that the canola contract has good liquidity, which allows farmers and others to get into and out of positions quickly and with small spreads.
The contract will continue to be based on western Canadian delivery points and be denominated and traded in Canadian dollar terms.
That’s all that matters for grain marketers, grain companies, exporters and food processors too. For the canola contract, being in Winnipeg means nothing.
This reality has been hanging in front of, and overhead, Winnipeg’s commodity exchange since electronic trading became reality, and since the Winnipeg Commodity Exchange embraced all-electronic trading in 2004.
That brave move, the first in North America, succeeded and saw the canola contract survive and thrive into the commodity boom, through it, and now in its aftermath.
Winnipeg moved before Chicago, Minneapolis, Kansas City and New York and its move has been proven right.
Today’s ICE decision to move makes sense on all levels. It’s a logic written by the placeless reality of electronic trading, by the efficiency of digital integration and by the disappearance of regional commodity markets.
This was an incoming tide that the WCE saw, faced, and now is being washed away with.
It’s not that nothing is being lost. There’s a lot of history stitching together western Canadian agriculture, the development of the Prairies, the rise, prominence and stagnation of Winnipeg, and the complicated interaction of free and regulated markets in Canada.
There’s also the loss of potential to create something new to help farmers, like the evolution of the canola futures contract that has been such a hallmark of Canada’s most vibrant crop industry.
As long as an exchange was physically housed and staffed in Winnipeg there was an inherent desire to create contracts that could serve commodity markets unique to Canada.
That’s why the exchange put such efforts into launching new contracts for wheat and durum and revising the contract for barley after the CWB died in 2011.
It’s hard to imagine anybody in New York spending much time trying to engineer a contract for the micro-market of Western Canada. Canola’s probably going to be the one-and-only specific contract for western Canadian farmers.
But that also isn’t a tragedy for farmers. The most heartening development in the western Canadian crops marketplace of the past five years has been the evolution of a robust and liquid cash trading market for the crops orphaned by the CWB’s disestablishment.
The Winnipeg exchange’s failure with futures contracts was evidence that the market had evolved in a different direction, away from indirect and arms-length futures trading and into direct, close farmer-to-buyer relationships. For Western Canada’s tiny (by world standards) crops, a futures contract can seem a plodding dinosaur beside the fast and flexible relationships that can now arise between buyers and sellers.
Is anything official going to mark the end of futures trading in Winnipeg?
When the Roman Empire finally ended in 476, with a German warlord not even bothering to put on the Roman Emperor’s crown that he had just seized, few noticed. Rome was done long before that.
When did the British Empire end? That’s hard to say, because as the British were furiously liquidating their colonial assets in the post-war period, it and the other powers of West, East and South had already turned their attention to new struggles and achievements.
Winnipeg’s futures-trading epoch could end the same, with a collective shrug.
Let’s hope it gets a better send off.
It is a notable and noble history and it deserves a proper farewell.
Timeline:
1887: Winnipeg Grain and Produce Exchange formed as a marketplace for cash-trading of regional bulk commodities. It sets up shop in the basement of city hall before moving into its first permanent home.
1904: Futures contracts for wheat, oats and flax introduced.
1908: Exchange moves into the massive new Grain Exchange Building, the largest office building in the British Empire at the time. Winnipeg futures prices are watched around the world. Winnipeg is seen as “the new Chicago,” home to a booming grain industry as pioneers open tens of millions of acres across Western Canada.
1913-17: Barley and rye futures added; First World War temporarily interrupts wheat futures trading.
1920s-30s: The exchange booms, creating many fortunes. Tension arises between small farmers and the Winnipeg grain trade. Farmer grain elevator co-operatives are formed and “speculation” is denounced throughout the “Roaring Twenties” and the Great Depression.
1935: Canadian Wheat Board created. During the Second World War and following it receives vast powers over Western Canada’s export crops, severely limiting the scope of the Winnipeg exchange’s futures trading.
1942: Wheat futures trading suspended as wartime controls imposed.
1963: Rapeseed futures added. This modest crop saves the exchange, as scientists transform it from an industrial lubricant into one of the world’s premium cooking oils. WCE hosts North America’s only canola contract and the world’s best export price discovery mechanism.
1972: Gold futures added. Winnipeg experiments with many different commodities in coming years, including lumber, silver, financial and energy products, but none become permanent successes.
1979: Exchange moves across Portage and Main to the new Commodity Exchange Tower.
2001: Oat futures delisted as trade in the shrinking commodity drifts to Chicago. Field peas delisted the following year.
2004: WCE becomes first N. American commodity exchange to abandon open-outcry trading and embrace an all-electronic platform. Immense pressure is placed on North America’s commodity exchanges as the internet eliminates the need for physical homes for exchanges and traders.
2005: Flax delisted.
2007: WCE acquired by Intercontinental Exchange, which also absorbs the New York Board of Trade. In coming years ICE expands aggressively, becoming a global behemoth.
2008: Feed wheat delisted.
2012: Exchange reacts to the demise of the Canadian Wheat Board monopoly by introducing Canadian wheat, durum and barley contracts.
2013: ICE acquires NYSE-Euronext.
2017: Wheat, durum and barley contracts delisted after failing to catch on in post-CWB market.
2018: ICE announces plans to move canola, Winnipeg’s sole functioning contract to New York. The exchange will be absorbed by ICE’s New York operations, ending 131 years of Winnipeg-based trading.
