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CME Group offers convergence tips

One of the major issues discussed in the CFTC's April agriculture forum was the lack of convergence between futures and cash prices in the ag markets. In July, the agency's Agricultural Advisory Committee held another meeting about convergence, where Acting Chairman Walt Lukken noted that "Some commercial participants have lost confidence in the ability to hedge in certain of these markets and it is critical that market participants work with the Commission to address this matter aggressively." Today CME Group offered to the CFTC some recommendations to improve convergence in its wheat contract, including increasing storage rates during the period from July through November to 8 cents per bushel per month, adding delivery points and a recommendation that the vomitoxin level for par delivery be lowered from three parts per million (ppm) to two ppm.

The seasonal storage rate and additional delivery locations would be implemented beginning with the July 2009 contract month and the lower vomitoxin level would be implemented with the September 2011 contract month. The recommendations must be approved by the CFTC before they can be implemented. Other CFTC agricultural action this month includes an expected report from the agency on Sept. 15 about whether swap dealers should be reclassified for regulatory and reporting purposes.

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This page contains a single entry from the blog posted on September 5, 2008 10:58 AM.

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