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Changes predicted for barley on Winnipeg’s ICE

(Resource News International) — The thinly-traded western barley futures on the ICE Futures Canada platform may see some changes in the near future in an attempt to bring more trading interest to the commodity.

Open interest in the barley futures market has steadily eroded over the past few months. Currently there are only about 2,400 open positions in the commodity, compared to the much more active canola market where open interest sits near 100,000 contracts. Canola and western barley are currently the only contracts traded through ICE Futures Canada.

Dave Guichon, a feed grains broker with Ag Value in Calgary, said recently that the thinly traded ICE barley futures no longer provided much direction for the cash market.

Open interest in the futures was declining in part due to ideas in the market that ICE Futures Canada was working on creating a revised contract, he said.

Brad Vannan, president and CEO of ICE Futures Canada, said Wednesday that the process of making changes to the barley contract has not yet been completed but should be finalized “very soon.”

Vannan wouldn’t discuss the details of any potential changes but did acknowledge open interest in the contract has been declining and trade was thin. A review of the exchange’s contracts was normal procedure, with there being a committee in place tasked with looking into contract-related issues, he said.

“Failing miserably”

Starting with the October 2007 western barley contract, ICE barley futures have been priced using a par region around Saskatoon. Prior to that, the contract was based around delivery to Lethbridge, Alta., home to the largest concentration of the country’s cattle feeding operations.

Andrew Gallie, a Winnipeg-based feed grains broker and former futures trader, thought any changes to the barley contract would most likely include looking at moving the pricing point for barley back into the Lethbridge area, to try to get the feedlot operators who were using the contract to use it again.

“Obviously, it’s failing miserably using a pricing point back in Saskatchewan,” he said.

Gallie was unsure if any changes would be “too little, too late,” as anyone who does hedge barley has already found an alternative to the ICE futures, whether that be U.S. corn or soymeal.

With line companies now managing their risk in other ways, “I think (ICE Futures Canada) will have to provide some incentives in order to get the trade back into the contract,” he said.

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