CME to launch spring wheat futures contract

CHICAGO — Bakers, food manufacturers and other wheat flour users could see a new venue for risk management in the second quarter.

                                                                                              The CME Group on Jan. 8 announced a plan to launch physically-delivered hard red spring wheat futures and options, which would allow market participants to buy and sell futures across all major wheat classes in one clearing house.

The CME Group is home to the original Chicago Board of Trade (CBOT) soft red winter wheat futures contract, having merged with that company’s holding company in 2007 in an $8 billion deal. The Kansas City hard red winter wheat futures contract also is traded on the CME’s Globex platform after the Kansas City Board of Trade consolidated its trading floor with its Chicago counterpart in 2013 and ceased operations in 2015. The KCBOT was founded in Kansas City in 1856.

The new hard red spring wheat futures and options will compete with Minneapolis spring wheat futures currently traded electronically through Miax Futures Exchange LLC, a wholly owned subsidiary of Miami International Holdings, Inc., since 2020 that was known as the Minneapolis Grain Exchange from its 1881 founding until October 2024.

More trading of spring wheat would be a boon for the industry, but there could be drawbacks, said Bill Lapp, founder and chief economist with Advanced Economic Solutions, Omaha, Neb.

“Any time you have more liquidity, it should be a good thing,” he said. “I suppose the downside could be splitting the volume between two exchanges, but I think generally speaking it will be good to see more opportunities. They could bring in something that improves some aspect of the trading that makes it more viable for more people. I don’t really see a downside to it.”

CME’s expansion plan comes on the heels of record volume traded through the exchange in 2024. Wheat futures and options trading volumes increased 10% last year to an average daily volume of 229,000 contracts, the company said, with average daily volume across all CME Group agricultural products at a record high 1.7 million last year.

John Ricci, CME Group managing director and global head of agricultural products, said the new contract offers flexibility and risk management opportunities for users.

“In addition to providing important capital efficiencies and increased spread capabilities, our new physically-delivered hard red spring wheat futures contract will also have enhanced specifications and be delivered through shipping certificates, maximizing flexibility for commercial participants,” Ricci said. “We will also be launching options at the same time — offering clients another important tool to manage risk in the wheat market.”

The new futures and options exchange is subject to approval by regulatory bodies and will be listed by and subject to the rules of the CBOT.

Although offering the opportunity to increase liquidity over the thinly traded Minneapolis hard red spring wheat contract, “CME’s success is not assured,” The Wall Street Journal said. “The Chicago exchange giant has a weak track record in launching new agricultural futures contracts.”

CME’s expansion moves in the past 10 years included a Brazilian soybean contract, which has struggled to gain traction, and Black Sea wheat and corn contracts launched in 2017 that were suspended in 2023.

The Chicago Mercantile Exchange, the Chicago Board of Trade, the New York Mercantile Exchange and The Commodity Exchange comprise the CME Group’s portfolio of financial derivatives exchanges.