Wary buyers wait it out | More volume needed
The new spring wheat, durum and barley futures have stumbled out of the ICE Futures Canada exchange and made little progress.
However, brokers and analysts say that’s not a surprise.
New futures contracts always have trouble getting up and going, and the prairie grain industry is up in the air about so much that it isn’t surprising traders and grain companies are holding back.
“At least we’ve had a few trades in everything,” said Ken Ball, a broker with Union Securities.
Read Also
One Beer Market Updates Day 3 – Lentils and beef
Day 3 of the One Beer Market Update at Ag in Motion 2025.
“It’s really going to take a few months to build these contracts. It’s hard to tell in the first few days.”
He won’t put his clients into the new markets until grain companies and grain buyers are actively trading the contracts.
Errol Anderson of Pro Market Communications in Calgary agreed.
“We aren’t willing to come forward until we see better liquidity,” said Anderson.
“We don’t want to put a client at risk. I’m just waiting for the commercials to step forward and start using it.”
Barley futures have traded every day since the new contract was unveiled, but the milling wheat and durum contracts are having periods when no trading occurs.
The futures are based on prairie delivery points across the West, so prices should converge to on-prairie cash prices.
ICE Canada will have trouble winning over big grain companies and users even with a perfect design, said Darin Newsom of DTN. Three existing North American wheat contracts means the need for another will have to be demonstrated.
“Getting them to move away from those markets is going to be difficult,” said Newsom.
Some traders see the Winnipeg contracts as a useful extra opportunity to do spread trading between the wheat markets and taking advantage of discrepancies between markets. If the Winnipeg contracts are seen that way, they could increase trading in all contracts.
Others see the Winnipeg contracts as an attempt to replace Minneapolis, on spring wheat at least, and therefore will more likely cannibalize existing trade than create new trade.
Newsom said the biggest obstacle will be to convince the big trading companies and firms to give the new futures a try.
“It’s going to be very hard to break away from the long-held belief that you need to use the Chicago, Kansas City or Minneapolis, even though it’s certainly a possibility.”
Ball said he is confident the contracts will do well, if they ever get a chance.
“There are probably thousands out there who would like to trade it but won’t until they can see a little bit more volume,” he said.
