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Australians Unhappy With CBOT, Launch Own Futures

Australia’s stock exchange operator, ASX Ltd., will launch a wheat export futures contract this summer, it said March 13, raising hopes for a new global reference price to complement the dominant U. S. market.

ASX said it expected the contract to start trading in May. Australia liberalized overseas wheat sales last year, opening up the market in one of the world’s top five exporters.

The contract will cover wheat from top-exporting state Western Australia (WA). Industry players hope it will catch on among the Aust ral ian trade and Asian consumers who import those high-protein Hard White wheat cargoes.

“This contract may fill a void quite nicely to help benchmark this quality wheat globally,” said Garry Booth, a trader at commodity brokers MF Global Australia.

“In a way it is badly overdue – the West Australia growers, the merchants and the buyers of WA grain will find this a superb tool as a product to manage risk.”

U. S. grain traders said they saw the contract as a potential competitor to hard wheat futures traded at the Kansas City Board of Trade, and as a move by the ASX to capitalize on complaints about the soft wheat futures contract at the Chicago Board of Trade, the main grain exchange in the United States.

“It doesn’t seem the CBOT can get their act together and I think this is a reference to that fact,” a KCBT wheat trader said. “It will be interesting to find out if Kansas City will eventually get the wheat futures business or will there be a new world contract like the one in Australia.”

A CBOT wheat trader said: “It might work locally or domestically but I think it will be difficult for them to get the liquidity. If you look at some of the smaller contracts like Paris or London, the volume is pretty small, there is just not the liquidity.”

Australia’s export market was a monopoly until last summer. Growers can now sell to 22 licensed exporters as well as domestic buyers. They are storing more grain on the farm until sale rather than delivering into grain pools managed by bulk handlers, making the need for risk management more acute.

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