03 REUTERS UPDATE 2-Australia to list wheat futures, seen CBOT complement
* ASX announces plans to list wheat export futures in May
* Could be global hard wheat benchmark vs CBOT's soft
* Strong uptake hoped, but logistics logjam may hurt
(Writes through, adds byline)
By Bruce Hextall
SYDNEY, March 13 (Reuters) - Australia's stock exchange
operator, ASX Ltd <ASX.AX>, will launch a wheat export futures
contract this summer, it said on Friday, raising hopes for a new
global reference price to complement the dominant U.S. marker.
ASX said on Friday it expected trading in the contract to
start in May, meeting demand for an export contract that arose
after Australia liberalised its overseas wheat sales last year,
opening up the market in one of the world's top five exporters.
The contract is designed to cover wheat from top exporting
state Western Australia (WA), which produces high-protein hard
white wheat, and industry players are hopeful that it would catch
on quickly among the increasingly competitive Australian trade
and Asian consumers who import those cargoes.
"This contract may fill a void quite nicely to help benchmark
this quality wheat globally," said Garry Booth, a trader at
commodity brokers MF Global Australia.
"In a way it is badly overdue -- the West Australia growers,
the merchants and the buyers of WA grain will find this a superb
tool as a product to manage risk".
In an export market that until last summer was a monopoly,
growers now have 22 licensed exporters they can sell to as well
as domestic buyers. They are increasingly storing grain on-farm
until sale rather than delivering into grain pools managed by
bulk handlers, making the need for risk management more acute.
The new ASX contract specifies hard wheat -- in contrast to
the Chicago Board of Trade's soft wheat contract -- and follows
the introduction of a domestic east coast contract six years ago,
although that contract <0#AWM:AX> has struggled to catch on.
"Since the liberalisation of wheat exports, there's an
opportunity to list a Western Australian contract which will
service the export market as the main driver," said Dougal
Hunter, ASX manager of agricultural derivatives.
"Hopefully anyone with export interests will be able to access
the contract."
DROUGHT, LOGISTIC RISKS
While the state's track record of producing large reliable
crops should help ensure the contracts mechanics run
successfully, the contract comes at a time when wheat exports
from Western Australian ports are being hampered by a lack of
capacity to move grain from country silos to port.
That's caused ships to wait for up to five weeks to load
grain and is causing consternation from importers who fear their
cargoes will arrive too late.
CBH Group, which handles most of the state's grain, says it
hopes to have a system in place by August to better manage
shipping queues but investment in rail infrastructure is needed
to overcome the transport bottlenecks.
And while MF Global's Booth said he doesn't expect the
contract to experience problems similar to those at the CBOT,
where there has been poor convergence between cash and futures
prices due to a surge in speculative trading, it remains to be
seen how quickly liquidity builds behind the new contract.
At delivery, futures and cash prices have traditionally
converged to match, as grain moves or leaves shipping points
based on normal market currents. Grain hedgers say the CBOT
contracts, in particular its wheat contract, are broken.
The new Australian contract will cover wheat delivered to the
Kwinana port zone in Western Australia and will be 20 tonnes. The
listing is subject to regulatory approvals.
Western Australia has exported more than 3.6 million tonnes
of the state's 12.3 million tonnes 2008/09 grain harvest, of
which 8.9 million tonnes was wheat.
ASX already offers an Australian milling wheat contract that
covers eastern Australia, and trade has accelerated over the past
year as the wheat belt emerged from two years of severe drought
that crippled exports and halved the normal crop size.
"In the last three months more than 400,000 tonnes a month
had traded, which is the most since before the drought," ASX's
Hunter said.
Volume trade in the last three months was 53 percent higher
than the same period a year ago, reflecting a recovery in
Australia's wheat production from a 13.0 million tonnes crop in
2007/08 as well as more participation by growers following the
liberalisation of the wheat trade.
* ASX announces plans to list wheat export futures in May
* Could be global hard wheat benchmark vs CBOT's soft
* Strong uptake hoped, but logistics logjam may hurt
(Writes through, adds byline)
By Bruce Hextall
SYDNEY, March 13 (Reuters) - Australia's stock exchange
operator, ASX Ltd <ASX.AX>, will launch a wheat export futures
contract this summer, it said on Friday, raising hopes for a new
global reference price to complement the dominant U.S. marker.
ASX said on Friday it expected trading in the contract to
start in May, meeting demand for an export contract that arose
after Australia liberalised its overseas wheat sales last year,
opening up the market in one of the world's top five exporters.
The contract is designed to cover wheat from top exporting
state Western Australia (WA), which produces high-protein hard
white wheat, and industry players are hopeful that it would catch
on quickly among the increasingly competitive Australian trade
and Asian consumers who import those cargoes.
"This contract may fill a void quite nicely to help benchmark
this quality wheat globally," said Garry Booth, a trader at
commodity brokers MF Global Australia.
"In a way it is badly overdue -- the West Australia growers,
the merchants and the buyers of WA grain will find this a superb
tool as a product to manage risk".
In an export market that until last summer was a monopoly,
growers now have 22 licensed exporters they can sell to as well
as domestic buyers. They are increasingly storing grain on-farm
until sale rather than delivering into grain pools managed by
bulk handlers, making the need for risk management more acute.
The new ASX contract specifies hard wheat -- in contrast to
the Chicago Board of Trade's soft wheat contract -- and follows
the introduction of a domestic east coast contract six years ago,
although that contract <0#AWM:AX> has struggled to catch on.
"Since the liberalisation of wheat exports, there's an
opportunity to list a Western Australian contract which will
service the export market as the main driver," said Dougal
Hunter, ASX manager of agricultural derivatives.
"Hopefully anyone with export interests will be able to access
the contract."
DROUGHT, LOGISTIC RISKS
While the state's track record of producing large reliable
crops should help ensure the contracts mechanics run
successfully, the contract comes at a time when wheat exports
from Western Australian ports are being hampered by a lack of
capacity to move grain from country silos to port.
That's caused ships to wait for up to five weeks to load
grain and is causing consternation from importers who fear their
cargoes will arrive too late.
CBH Group, which handles most of the state's grain, says it
hopes to have a system in place by August to better manage
shipping queues but investment in rail infrastructure is needed
to overcome the transport bottlenecks.
And while MF Global's Booth said he doesn't expect the
contract to experience problems similar to those at the CBOT,
where there has been poor convergence between cash and futures
prices due to a surge in speculative trading, it remains to be
seen how quickly liquidity builds behind the new contract.
At delivery, futures and cash prices have traditionally
converged to match, as grain moves or leaves shipping points
based on normal market currents. Grain hedgers say the CBOT
contracts, in particular its wheat contract, are broken.
The new Australian contract will cover wheat delivered to the
Kwinana port zone in Western Australia and will be 20 tonnes. The
listing is subject to regulatory approvals.
Western Australia has exported more than 3.6 million tonnes
of the state's 12.3 million tonnes 2008/09 grain harvest, of
which 8.9 million tonnes was wheat.
ASX already offers an Australian milling wheat contract that
covers eastern Australia, and trade has accelerated over the past
year as the wheat belt emerged from two years of severe drought
that crippled exports and halved the normal crop size.
"In the last three months more than 400,000 tonnes a month
had traded, which is the most since before the drought," ASX's
Hunter said.
Volume trade in the last three months was 53 percent higher
than the same period a year ago, reflecting a recovery in
Australia's wheat production from a 13.0 million tonnes crop in
2007/08 as well as more participation by growers following the
liberalisation of the wheat trade.
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