The Winnipeg Commodity Exchange made small changes to its oat futures contract last week that may encourage more people to use it.
Spokesperson Sandra Craven said the exchange decided to change the shipping logistics in the contract based on some comments from the American Oat Association.
“We had the impression that some of the potential market participants in the U.S., particularly small millers, they’re a little bit afraid of the Canadian car allocation system,” said Craven.
Starting with the March 1998 contract, sellers delivering on a futures contract will be responsible for supplying the rail cars.
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Until now, Craven said, if a Canadian oat seller was left with a short position in the market and a U.S. buyer was left with a long position, the buyer would have been responsible for getting access to the rail cars to ship the grain from the delivery point.
Making and taking physical delivery of grain on futures contracts rarely happens, Craven said. Buyers and sellers use the contract to protect themselves from market risk, not for buying and selling actual grain.
But to make the contract work, the threat of physical delivery always exists. And the threat of finding rail cars in Canada was enough to make some potential users of the futures contract wary.
“It’s something that we understood that the Americans were a little bit concerned about,” Craven said.
“If they ever got in a delivery situation, they didn’t want to be held responsible for coming up with the cars.”
The exchange couldn’t change nearby futures contracts which already have open interest. But because the March and May 1998 contracts did not have any open interest, the exchange took them off its board on June 27 for a few days before relisting them July 2.
Oats futures have been hurting for volume at the Winnipeg exchange since the contract was revised about a year ago. The vast majority of oats hedging is done at the Chicago Board of Trade.
