The Commodity Futures Trading Commission (CFTC or Commission) approved amendments to the Chicago Board of Trade’s (CBOT) Wheat futures contract. In its analysis, the Commission staff found that the amendments have the potential to increase economically-available deliverable supplies, delivery capacity and the number of shipping certificate issuers for the futures contract, and should reduce the contract’s overall susceptibility to manipulation.
The amendments were submitted by the CBOT in correspondence dated September 5, 2008, October 28, 2008, and November 26, 2008 for approval pursuant to section 5c(c) of the Commodity Exchange Act and Commission regulations 40.4 and 40.5.
“The Commission and the industry have been concerned about this contract’s performance and the lack of convergence between the contract’s cash and futures prices,” said CFTC Acting Chairman Walt Lukken. “While these amendments are a good first step, additional changes may be needed to ensure that this contract serves its price discovery and risk management functions. As a result, the Commission has tasked Commissioner Mike Dunn to form a blue ribbon panel as part of his Agricultural Advisory Committee to study the convergence issue and report back to the Commission in the spring with additional contract amendments should they be necessary.”
Today’s approved amendments do the following:
• add three new delivery locations, including a 12-county area in northwest Ohio at a discount of 20 cents per bushel; a territory along the Ohio River from Cincinnati to Mississippi at par; and a territory along the Mississippi River from St. Louis to Memphis at a 20 cents per bushel premium;
• increase storage fee to eight cents per bushel from five cents per bushel for the period from July 18 through December 17;
• reduce the vomitoxin level for par delivery to two parts per million (ppm) from three ppm and establish a discount for wheat with three and four ppm at rates of 12 and 24 cents per bushel, respectively.
The amendments relating to the additional delivery territories and seasonal premium rates will be effective for existing and newly listed contract months beginning with the July 2009 contract month. The amendment relating to the lower par vomitoxin level will be effective for newly listed contract months beginning with the September 2011 contract month.
In approving the amendments, the Commission noted that it will be closely monitoring the trading of this contract to determine if the amendments successfully address the problem of contract performance, particularly the periodic failure of futures prices to converge with cash prices.
