Active trading in CME Group's new cash-settled futures for Black Sea grain suggests the exchange may have found a way to tap into booming Black Sea export trade after an unsuccessful earlier foray in the region. The derivatives, based on S&P Global Platts' price benchmarks for Russian wheat and Ukrainian corn, have generated more than over 15,000 lots representing 750,000 tonnes of grain since their December launch, in stark contrast to CME's illiquid Black Sea wheat contract with physical delivery dating back to 2012.
Record Russian wheat exports this season have cemented the role of the Black Sea region as a driver of global grain prices and trade. CME's new wheat futures are seen as having the biggest potential given Russia's clout as the world's largest wheat exporter, and they have so far generated over 14,000 lots traded compared to 1,400 for corn. Ukraine is the world's fourth-largest corn (maize) exporter.
The cash-settled system of the new futures is a draw for participants keen to avoid the constraints of physical delivery. The possibility of off-screen block trades, meanwhile, has allowed CME to tap into existing over-the-counter (OTC) trading, with the guarantee of exchange clearing to remove counterparty risk.
Platts says its physical price benchmarks for Black Sea grain and Australian wheat already generated some 500,000 tonnes in OTC trading in the year preceding the launch of the Black Sea futures with CME.
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