The CME Group Inc (CME.O) announced several changes to its Chicago Board of Trade wheat contract on Tuesday, which include reducing the amount of vomitoxin allowed in wheat delivered against CBOT contracts.
The new quality rules are intended to make the delivered wheat more attractive to millers and exporters, it said.
CME said that starting with the September 2013 wheat contract, the exchange would eliminate wheat containing 4 parts per million (ppm) vomitoxin, a wheat toxin caused by a fungal disease, from deliverable grades.
The exchange will raise the discount for wheat containing 3 ppm vomitoxin to 20 cents per bushel from 12 cents. Most exporters and millers require wheat with a vomitoxin content of 2 ppm or less.
"The effect of these changes will be to make the quality of the terminal stocks better and more desirable to own in the future," ABN AMRO analyst Charlie Sernatinger said in a note to clients.
Vomitoxin is the byproduct of a wheat disease called fusarium head blight, or scab. The US Food and Drug Administration limits vomitoxin in food to 1 ppm. Livestock will not eat grain with high levels of the toxin.
Some traders worried that the tighter restrictions would cause complications in years when scab outbreaks are widespread in the Midwest, where farmers grow soft red winter wheat, the type that trades on the CBOT.
"If you have a year where everything has vomitoxin in it, where are you going to get deliverable wheat? I don’t know what the answer will be," said Diana Klemme, vice president with Atlanta-based Grain Services Corp.
"But if you create a contract (where) you allow high vomitoxin wheat to be delivered, you create something that nobody can use. You can’t create a contract that resolves all the issues, but the contract should be merchantable," Klemme said.
Also starting with the September 2013 contract, CME said it would reduce the discount for wheat delivered in the Northwest Ohio delivery territory to 10 cents per bushel, from 20 cents.
Along with the vomitoxin changes, CME said that starting Dec. 1, the exchange would allow classes of hard wheat, including hard red winter, dark northern spring and northern spring, to be delivered in the St. Louis delivery territory.
Currently these classes of wheat are deliverable at all other CBOT wheat delivery locations.
"I think it was long overdue to include St. Louis as a point that includes hard wheat, as the other points do," Klemme said. "St. Louis was conspicuous in that you could not delivery those other classes. In its day and age perhaps it made some sense but that wasn’t the case any more," she added.
The CME statement said the exchange had been discussing potential contract modifications with industry participants since February and that the changes were the result of industry feedback.
"We believe these modifications will further enhance the strong convergence we have seen in recent contract delivery periods," Tim Andriesen, CME’s managing director for agricultural commodities and alternative investments, said in a statement.
Deprecated: strpos(): Passing null to parameter #1 ($haystack) of type string is deprecated in /home/agriviek8Qv/agriviet.net/public_html/wp-includes/comment-template.php on line 2522