The Winnipeg Commodity Exchange’s oats contract had an abysmal March and some in the industry question its future.
“From the beginning the contract was doomed to fail,” said analyst Randy Strychar of Statcom Ltd. in Vancouver, which publishes an international oats report. “The writing’s been on the wall since before the contract came out.”
The revised contract came into effect Aug. 1, 1996.
Last month there were no trades on the Winnipeg oats contract, down from a volume of 502 in March 1996. This calendar year’s total volume so far is only 10, compared to 1,480 at this time last year, a decrease of 99.3 percent. Since the beginning of the crop year in August, volume is 1,980, down 75.1 percent from 7,952 last year.
Read Also
Going beyond “Resistant” on crop seed labels
Variety resistance is getting more specific on crop disease pathogens, but that information must be conveyed in a way that actually helps producers make rotation decisions.
Critics such as Strychar say the contract won’t attract interest because the vast majority of oats trading takes place in Chicago. As long as the major companies are all trading there, few will want to trade anywhere else.
A Winnipeg trader who wished not to be named agreed.
“It’s hard to excite people about trading a contract that doesn’t trade,” he said. “I really question the long-term viability of it.”
Remaining optimistic
But the Winnipeg Commodity Exchange isn’t throwing in the towel.
“We certainly have a very strong interest in seeing this contract work,” said Bruce Love, the exchange’s manager of marketing and education. “I think we’ve got a real role to play in assisting in the marketing of that crop.”
Love said the exchange knows the lack of trading in March is a problem and it is surveying the trade to see why so few are using it.
The contract was overhauled a year ago and Love said the exchange expected some initial acceptance problems while the trade got used to it.
He said the exchange feels the contract is technically good, and “we just want to have a look at it and find out some of the reasons why people aren’t trading it.”
Both Strychar and the Winnipeg trader said the contract itself isn’t the problem.
“The exchange did the best it could – it’s a decent contract,” Strychar said. “But once the Canadians switched into putting their hedges into the U.S. there was really no sense to come back to Canada.”
The Winnipeg trader said the Canadian contract is better in many ways than the Chicago one, but that might not matter.
“Even if there are flaws in the U.S. contract, if you don’t get the commercial support in Winnipeg for a contract that may be superior or better meets the needs of the Canadian end user, it doesn’t matter. It’s simply a matter of liquidity.”
The trader said General Mills is an essential player for a successful oats contract, and if that company isn’t using it “the opinion I’ve heard is it won’t trade.”
But Love thinks Winnipeg’s contract can survive because it is different than Chicago’s: “I think our contract is a very good complement.”
The canola contract, which Love said does well, trades as a complement to soybeans. Other new contracts, such as western barley, are now doing well after slow starts. Western barley is now the exchange’s second largest volume contract.
Love said the exchange will talk to its members and commercial players to find out how to make the contract work.
