20 or 100 tonne contract

[wd9]

Not sure how much this has been
discussed but what does the community
think of having 100 tonne contracts for
wheat? Of course matches the US system
but how will that effect the our
fledgeling contract?

Is 100 too big? Should it be 20? Would
that spur more interest? I would think
it would. 20 tonne contracts would allow
more trades and certainly farmers in the
trade.

Could it be changed? Has that ship
sailed? So many questions and concerns.
Would love to hear from ya.

[furrowtickler]

Make it at least 40 tns, basicaly a truck load min dockage. 80 pearcent of all grains and oilseeds are delivered by semi load - keep it simple, imo

[wd9]

Canola and most everything else is 20.
Don't think its about the size of the
truck as 2 x 20 is 40 anyway, its about
number of trades. Again, could be way
wrong here.

[hobbyfrmr]

I agree with furrow, I have been selling in
increments of 40 MT since the '90's when the
local elevators closed. That's a btrain semi load
to anywhere. Two btrains fills a rail car,
everybody wins.

[mcfarms]

With the size of the Canadian market and the desire for us to have a viable trading platform for canadian grains we want liquidity and volume is one way to start getting these contracts a volume level that will attain liquidity. My vote is for 20 for canadian grains. I've traded all sorts of various size contracts and never had anyone say its not big or small enough. The fact that a person wants to sell by the size of truck they own or the size of bin they have shouldn't be the deciding factor it should be the need for volume at these early days for these contracts. The success of Canola and it's "ease" of marketing is largely a result of the fact it is visible and has the volume to be viable for all players in that market.

[TOM4CWB]

WD9,

Being that the US markets are in 5000bu contract sizes... 100T should be a reasonable size.

I do not get why this is/should be an issue....

[jdepape]

100 tonnes were chosen in the wheat contract in
order to approximate (or at least get reasonably
close to) the 5,000 bu US wheat contracts. The
main thing we want is liquidity and there are "prop
traders" (proprietary traders - large spex) who we
anticipate will be trading the spread between ICE
and MGEX and/or CBOT. What is important to
them is "tick size" - the $ involved in one tick. On
US wheat, one tick is $12.50. With 100 tonnes,
ICE wheat is $10.00. To these guys, that's
reasonable. They're not impressed with $2.00 per
tick (on a 20 tonne contract).

Another factor is execution cost - with 20 tonne
contracts, their execution cost would be 5x what it
will be with 100 tonne contracts. When you start
trading size, this starts to matter.

Other considerations were that - for the most part,
Winnipeg contracts have traditionally traded in
multiples of 5 lots (100 tonnes) anyway.

Conventional wisdom also says the prop traders
and like-minded commercials will bring more
volume and liquidity to the market than those
farmers who trade less than 100 tonnes at a time.
(Many farmers will trade 100 tonnes or more).

Also keep in mind that the new CWB (and
possibly some grain companies) will be offering
"futures first" contracts and I suspect they will
allow less than 100 tonnes per contract.