The head of ICE Canada is optimistic interest will pick up in the 10-month-old milling wheat, durum and barley futures contracts.
Open interest in all three commodities is confined to the two nearby months and trading volumes have been very low.
“There have been discussions held with a subsection of the group who helped create the milling wheat, durum and barley contracts in hopes of kick-starting the use of these risk-management tools,” said Brad Vannan, ICE Canada’s president and CEO.
The review resulted in one change — a shift to a 13.5 per cent protein content from 12.5 per cent — “but collectively the group said it was still confident in the structure and as a result no other changes were made,” said Vannan, adding the hope is activity will pick up as people become more familiar with the advantages of futures contracts.
But grain companies seem to have a “if it’s not broke, why fix it” mindset and are content to use the U.S. markets for hedging, said Mike Jubinville, an analyst with ProFarmer Canada.
Market participants want to see the commercials who helped design the contracts start using them regularly, said one trade source.
More trading would boost interest, added Jubinville.
“Once there is liquidity in these commodities, then the speculators will start to use the contracts,” he said.
Give it time, said Vannan.
“I would say that the wheat market is still in its infancy, and there is still a lot of discovery going on,” he said. “None of the grain companies are approaching the task in the same manner, with each having a different view on how to develop what is best for them.”
Vannan said he is certain that a standard will eventually be developed and once a successful program is created others will likely institute a similar system. He wouldn’t speculate on how long ICE Canada will be patient with the contracts, but said delisting of a futures contract is not a decision that would be made lightly.