By Caroline Henshaw
SYDNEY--ASX Ltd. (ASX.AU), Australia's dominant exchange, is
looking to rejig its grain futures contracts in a bid to capture
business from the country's growing role as Asia's breadbasket, a
senior executive at the exchange said Tuesday.
Dougal Hunter, ASX's manager of agricultural derivatives, said
he hopes to replicate the surge in trading on Europe's main grain
trading exchange since 2010 by allowing contracts to include grain
delivered from different Australian ports that has been harvested
in different seasons.
Consistently high grain prices since 2008 have grabbed the
attention of bourses worldwide, with many of them trying to provide
a wider platform to profit-hungry investors and improve their own
bottom line in the bargain.
Earlier this year, the InterContinental Exchange launched its
grains futures contracts. The CME Group was quick to respond by
extending the trading hours for CBOT contracts of several
agricultural commodities. CME also launched its Black Sea region
wheat contract in June.
The potential for grains trade on bourses is huge as illustrated
by average daily volumes of wheat traded on Paris-based NYSE Liffe
- owned by NYSE Euronext (NYX) - which including both futures and
options have risen to 27,185 lots in 2011 from just 6,992 lots in
2008.
"Being able to replicate the success story in Europe would be a
fantastic achievement," said Mr. Hunter in an interview. "It
demonstrates it's possible to establish an exchange outside the
traditional home of North America. The industry would only benefit
from a more liquid futures market here."
The Chicago Mercantile Exchange Group which now includes the
Chicago Board of Trade has been a grain trading hub for centuries
and has historically been considered the global benchmark for the
industry.
But rising food demand from the growing middle classes of Asia
and the Middle East have seen Australia and Black Sea producers
take larger slices of the international grain trade, and prompted
investors to seek new ways to profit from trading in different
places.
In Australia, where wheat exports reached near record levels in
the last fiscal year ended June 30, major exporters such as
commodity giant Cargill Inc. say the local futures market is too
underdeveloped to provide an effective hedging mechanism for the
country's growing exports.
ASX's main New South Wales wheat contracts trades up to 1,200
contracts a day, less than a fifth of Liffe's daily average between
January and May this year.
Mr. Hunter said ASX has been consulting buyers in Australia's
main export markets in Asia, as well as traders and farmers in the
domestic market, to ensure the modifications attract a larger
investor base.
The changes, including allowing NSW wheat to be delivered from
the states of Queensland, Victoria and South Australia, modifying
the protein content specifications for the contracts and allowing
wheat from different seasons to be delivered against the same
contract would help this, he said.
The exchange is also evaluating the potential for Western
Australia-based feed barley and canola contracts in response to
rising Australian exports.
"Ultimately what we would like to see is a market in Australia
that provides effective risk management for everyone in the supply
chain," said Mr. Hunter.
Write to Caroline Henshaw at caroline.henshaw@wsj.com
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