Securities watchdog clears ICE for wheat, barley futures

Winnipeg’s commodity exchange has the blessing of the Manitoba Securities Commission to start trading new wheat, durum and barley futures contracts next summer.

The MSC’s approval of the new contracts at ICE Futures Canada came the day after the House of Commons passed Bill C-18, which is expected to end the Canadian Wheat Board’s single marketing desk for Prairie wheat and barley effective Aug. 1, 2012.

C-18 still must get Senate approval and royal assent, both expected by the end of this year. ICE then expects to list its new contracts in January 2012; the first will be listed for October 2012 delivery.

The new contracts are to be modeled on ICE Futures Canada’s canola futures contract, which trades over four million contracts (80 million tonnes) per year.

Each milling wheat and durum wheat contract will be 100 tonnes in size, while the barley contract, like ICE’s canola and current Western barley contracts, will be for 20 tonnes.

All the new contracts will trade in Canadian dollars, with a minimum price fluctuation (tick) of 10 cents per tonne, or $10 per contract. The wheat and durum contracts will have a daily price limit of $20 per tonne, expandable to $30 and then $40, while the barley contract’s daily limit will be $10 per tonne, expandable to $15, then $20.

The par deliverable grade for milling wheat will be No. 2 Canada Western Red Spring (CWRS) with protein levels of at least 13 per cent, a maximum two parts per million vomitoxin and maximum one per cent dockage. For durum, the par grade will be No. 1 CW amber durum, at a minimum 12.5 per cent protein with the same vomi and dockage limits.

For barley, meanwhile, the par grade will be No. 1 CW, with a limit of 0.5 p.p.m. vomitoxin and two per cent dockage.

During the contract design phase, ICE noted, maltsters expressed a preference for a feed barley futures as a reference for pricing malting barley production contracts, rather than to have a futures contract specifically for malting grades of barley.

The barley and milling wheat contracts will be priced in their major production area in eastern Saskatchewan — east of Saskatoon, specifically — rather than at a single destination or trans-shipment point, providing "flexibility for shipment in all directions," ICE said.

Durum, by the same token, will be priced in southwestern Saskatchewan — west of Moose Jaw, south of Saskatoon and at Saskatoon.

ICE said last month its existing Western barley contract may disappear, or may not. It could run in parallel with the new barley contract, the exchange said, but the older contract could be delisted if interest remains at its current chronically low level.

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