WINNIPEG – Farmers may soon be able to hedge their cattle and hogs on the Winnipeg Commodity Exchange, as well as their grain. And for something completely different, the exchange is also looking at natural gas.
The exchange is considering throwing livestock and natural gas into the trading pits if the industries see a need for Canadian futures or options contracts.
Sandra Craven, spokesperson for the exchange, said once the federal government’s Cattle Options Pilot Program wraps up in a year, “then cattle producers will not have any sort of a Canadian risk management tool or alternative.”
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The exchange has been working with the federal government and a cattle industry task force.
“If there’s a need, we’d like to list a cattle contract of some type,” Craven said.
She said the exchange is also talking to people in the hog industry to see if there’s a need for a Canadian hog contract.
Natural gas is a departure from the usual agricultural commodities traded on the exchange floor, but Craven said there are a lot of similarities between the industries.
She said the industry has many small producers, several large players as well as brokers. The industry has transportation and delivery problems with limitations on pipelines, and a number of delivery points.
Until a few years ago, the industry was also highly regulated. Since then, Craven said, it has gone through extensive deregulation.
“There seems to be an incredible number of overlaps with the grain industry,” Craven said. “So from our exchange’s standpoint, we think that it would be a logical extension to what we’re doing right now.”
Right now, the New York Mercantile Exchange and Kansas City Board of Trade trade natural gas contracts based on U.S. delivery points.
She noted that experts have studied the relationship between natural gas prices in Alberta and the futures prices in Kansas and New York. “They don’t track well,” she said. “There doesn’t seem to be a really effective hedging mechanism for Canadian participants in the gas industry.”
Craven said the exchange has hired a U.S. consultant to look at the feasibility of adding the commodity.
