Effect of new crops on futures trading

[jwright]

With the possibility of many new biotech crops being introduced, including various streams of canola with 'novel' traits, what will be the effect on commodity trading? Will the market be too fragmented to provide adequate trading volume in any one commodity?

[cherynlg]

This is an interesting question. I don't know the answer, but there are some things developing. I understand that the Tokyo Grain Exchange is considering an edible bean contract. Some of the discussion is that this will be a non-GMO contract. I think their members haven't decided on whether to proceed or not, but we may see different futures contracts develop for GMO and non-GMO products. If this occurs, it will dilute the overall volume, but I think on a fairly minor basis. The price relationship will likely get established and not vary too much, so the larger volume exchanges will continue to attract the business because of liquidity. I'd like to hear what others see happening?

[charliep]

I don't expect that the new novell trait canola, etc. will have that much impact on futures volumes. Companies will continue to use the generic futures contract (1/2 Canada canola in the case of WCE futures) for hedging/risk management purposes with differences in value/premiums for meeting different specifications/growing specific varieties being reflected in basis. You are seeing that now in many of the specialty canola contracts (eg. Cargils inter mountain varieties). How will this impact the farm community when you have a whole bunch of different types of crops - each with its own basis/pricing scenario? What are your thoughts about growing a crop with just one buyer? (An example from a former life is UGG/linola). How will you know you are being paid a fair price for these crops or is the most important factor that you are able to grow these crops with better profit potential than other alternatives?