Winnipeg exchange ponders changes to several contracts

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Published: May 14, 1998

Some farmers believe the difference between canola futures and cash prices would be more predictable if they could make physical delivery against a futures contract.

The board of governors of the Winnipeg Commodity Exchange will take a look at the feasibility of third-party delivery against oilseeds futures contracts at a May 20 meeting.

Currently, only elevator owners or seed crushers who are members of the exchange can deliver against the futures.

Futures contracts aren’t normally used to buy or sell grain. But the threat of delivery is built into contracts to make sure futures prices track actual cash prices.

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The exchange thinks third-party delivery is a way to increase or enhance the threat of delivery, said spokesperson Sandra Craven.

But the exchange and its members will have to be convinced there is a way to make it work without compromising the integrity of the contracts, she said.

Exchange officials have been trying to figure out a procedure to ensure farmers and other market participants will not default on deliveries.

“The worst thing that could happen to a futures contract is that the integrity is compromised, that someone defaults on the contract,” said Craven.

“Then everyone’s faith in the market is shaken.”

Barley feedback wanted

Got a beef or bouquet about the barley futures contract?

The Winnipeg Commodity Exchange wants to hear about it.

As part of a regular review of its contracts, the exchange is looking at how its western barley contract is working.

Officials are analyzing how well the futures contract reflects the underlying cash market, said spokesperson Sandra Craven. But it’s also looking for comments from the industry on how well the contract meets its needs.

“It’s more of an informal type process,” she said.

“But if … anyone has thoughts, problems with the contract, anything good to say about it, now is the time.”

Will hogs contract work?

After a year of collecting data on cash prices for hogs in Western Canada, the Winnipeg Commodity Exchange is still looking at whether a hog futures contract will be feasible.

Exchange officials are using the data from processors to determine how well the Chicago hog futures prices reflect what is happening in the Canadian market, and assess how much basis risk Canadian market participants have.

The exchange is also trying to make sure data comes in regularly and is accurate, said spokesperson Sandra Craven.

It has had good support from all but one packer, she said.

While all of the exchange’s grain contracts include mechanisms for physical delivery, the potential hog contract would be settled with cash.

The Canadian hog industry has been rapidly changing, she said, and the exchange wants to make sure the futures contract it designs will continue to be relevant to the industry.

The exchange also wants to get its new clearing system in place first. That change is happening this summer.

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Roberta Rampton

Western Producer

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