A European malting barley futures contract is about to be born, but potential North American users don’t plan much of a baby shower.
Some players in the grain industry are skeptical the European contract will work, few think the European contract will be useful for nonEuropean users and there appears to be little interest in setting up a similar contract in North America.
“I don’t think you’ll ever see one used in the U.S.,” said Mike Krueger of the Money Farm in Fargo, North Dakota.
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“I just don’t see it happening. They’ve tried a lot of those things in the past and just got no traction.”
The Canadian Wheat Board, one of the world’s largest sellers of malting barley, is showing little interest in the contract.
“It’s too early to say (whether the board will use the contract after it is introduced),” said board spokesperson John Lyons.
“We’ll be taking a bit of a wait-and-see attitude because we’d have to monitor it, see if it’s actively trading and see what the volumes are.”
The European contract will operate out of the Paris exchange of NYSE Liffe, which is owned by NYSE Euronext. The Paris exchange is home to major European agricultural futures contracts such as wheat and canola.
The malting barley contract will be launched May 10 and is designed for malting barley from any European source. Last year, one-quarter of the European Union’s 61 million tonne barley crop was considered to be malting barley.
Axereal, a major grain trading organization in France, has endorsed the new contract.
“The malting barley sector has been in need of an organized market tool for many years,” said Axereal deputy chief executive officer Francois Pignolet.
“It is essential for the organization of the industry from producers to brewers.”
However, other parts of the trade were critical of the decision to base the contract on the more specialized malting barley rather than feed barley.
“You should always set up a futures market with a massive underlying product,” said a different French trader.
In North America, many smaller-volume, specialized crops have lost futures contracts or attempts to create them have failed.
Durum and sunflower contracts have failed in the United States, and Winnipeg has seen contracts such as feed peas, flax and feed wheat die slow deaths.
Krueger thinks the North American acreage base and the commercial purchasing base of malting barley are too small to create sufficient demand for a futures contract in North America or to use the European contract.
“Who’s going to trade it,” he asked, noting the small number of maltsters and brewers.
“The crop is raised in such a small geographical area that if that area has a weather problem, it can have a huge effect on supply and demand and therefore liquidity in the futures markets.”
