The Minneapolis Grain Exchange (MGEX) has announced it will drop the U.S. origin stipulation for wheat delivered against its Hard Red Spring wheat (HRSW) futures contract by May 2013 — which could take business away from the planned spring wheat futures contract on the ICE Futures Canada platform.
However, Brad Vannan, president of ICE Futures Canada in Winnipeg, said they aren’t worried about losing business to Minneapolis.
“The contract we are in the process of creating is entirely designed to suit the Canadian market,” Vannan said. “The Canadian wheat market is large and geographically distinct, so it will follow its own price.
“Farmers and elevator companies will find that having a spring wheat contract priced in Canadian dollars per tonne for western Canadian delivery is much easier to relate to, and provides a higher degree of transparency.”
Vannan did admit that the elimination of U.S. origin product at the MGEX would take some business away from Canada, but he noted the Winnipeg-based market would be getting some business from the U.S.
“There is a good chance too that U.S. business will be hedged in Canada. They are looking forward to having an additional wheat contract in the marketplace,” he said.
“Our goal was never to abolish Minneapolis, but rather allow another contract for the Canadian market as a whole.”
The spring wheat contract is not legally able to be introduced on the ICE Futures Canada platform until the Canadian Wheat Board Act is abolished or changed by the federal government. The government has said it plans to put an end to the CWB’s single-desk marketing powers in August 2012.
Along with its spring wheat contract, ICE Futures Canada has said it intends to bring in a durum wheat future, which would be the only one of its kind in the world.