Although open interest in western barley futures on the ICE Canada trading platform continues to be virtually non-existent, officials with the exchange are hoping the industry will again participate in the contract and prevent the delisting of the commodity.
“We are not currently considering delisting the western barley contract at this time,” said Brad Vannan, ICE Futures Canada president and CEO.
Open interest in all western barley contracts declined to zero in the first week of December 2010, when participants liquidated the remaining positions in the nearby
December contract. There has since been some minor interest in the nearby March future, with open interest currently sitting at just two contracts. No trades have occurred since those two contracts were positioned in the March contract in December.
Vannan said there remains hope that future efforts will be successful in reinvigorating interest in barley futures.
“There has certainly been a number of circumstances that were beyond ours and the trade’s control, which put a damper on the usefulness of the contract,” Vannan said.
The downfall in open interest was tied to how western Canadian barley flows into the domestic and export market, the decline in the size of the Canadian livestock herd, the changing over to dried distillers grain as a feed, and by producers deciding to store excess production on farm instead of in the commercial grain elevator system.
In the past, producers have tended to move product into the grain elevator system, which would prompt grain elevators to place hedges into the market, creating open interest. The elevators would also roll those hedges over, depending on the situation, keeping open interest high in the futures market. However, because of advances in on-farm grain storage, producers haven’t been moving as much product into the grain elevator system, said Vannan.
“There is also more of a hand-to- mouth buying-and-selling system in the barley industry for both domestic and export demand,” he said.
ICE Canada officials are trying to get a better handle on the situation by attending events such as the Western Barley Growers convention in Calgary next week, said Vannan.
Market participants said the barley industry began to lose confidence in the contract quite some time ago, and especially when open interest in the barley future dropped below 10,000 contracts. With only two contracts open, the future is virtually unusable as a viable pricing mechanism, they said.
ICE Canada plans to be patient with the contract and hopes the trade will continue to support the commodity, said Vannan.
He also pointed out that delisting a commodity is quite easy, but to relist it once it has been removed is a very detailed and prolonged process.
“Thereisalsomoreofa hand-to-mouthbuying-and- sellingsystemin thebarleyindustry forbothdomesticand exportdemand.”