Canadian spring wheat will have a futures contract on the Chicago Board of Trade in June.
If it works, it will provide a price window into the often-opaque world of western Canadian wheat values, at least those in Vancouver.
“We are pleased that CME Group (owners of the CBOT) and their customers recognize the independent role our Canadian wheat price assessment plays in providing price transparency, which in turn provides opportunities for the provision of risk management tools that bring greater efficiency to the global agricultural markets,” Ian Dudden, global pricing director for agriculture for S&P Global Commodity Insights, said in a CME press release.
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The cash-settled contract is based on Vancouver f.o.b. Canada Western Red Spring prices collected by Platts, using No. 2 CWRS with 13.5 percent protein.
The contract is priced in U.S. dollars and each contract represents 50 tonnes. The symbol will be CWR.
The contract months are September, December, March, May and July. Most Canadian wheat trades physically from October to early summer, but North America’s other wheat futures crops, including the spring wheat contract in Minneapolis, use the months the Canadian wheat contract will use.
That is designed to allow wheat traders to “spread trade” between different classes of wheat, including Chicago soft red winter, Kansas City hard red winter and Minneapolis spring wheat.
Canola futures on the ICE exchange, on the other hand, are more closely linked to the Canadian commercial trade, using November, January, March, May and July.
“Canadian wheat futures are complementary to our existing suite of wheat products and will allow our clients to more effectively manage their exposure across the entire global wheat trade,” Tim Andriesen, managing director of agricultural products at CME Group, said in the news release.
Placing the price point for Canadian wheat at Vancouver port position provides a buyer-relevant price but one not nearly as relevant to farmers as a prairie-based price. There is often a significant and unpredictable divergence between prices in Manitoba, Saskatchewan and Alberta and those in Vancouver, so any farmer using a Vancouver-based futures contract would face considerable basis risk.
For overseas importers, however, prices based on prairie points are less relevant than those at port terminals.