CME extends corn trading limit review

News
Jun 24, 2011
by WLJ

CME Group Inc. wants more time to convince food companies and farmers the daily trading limit for U.S. corn futures should be increased.

The exchange is seeking to raise the daily limit for corn futures at the Chicago Board of Trade to 40 cents from 30 cents. It needs approval from the U.S. Commodity Futures Trading Commission (CFTC) and asked regulators to extend a review period for the proposal by 45 days from the deadline. The CFTC said last Monday it had approved the request.

“During the extended review period, which will begin on June 24 and continue through Aug. 8, CME Group plans to hold an industry meeting to explain the rationale for the proposal and its relationship to volatility and the procedure used by CME Clearing to set margin levels for corn and other grains,” a notice from the exchange said.

CME has already run into opposition to its proposal from farmers, grain elevators and food companies. They have complained that a larger limit would increase volatility in the corn market and expose hedgers to bigger margin calls if prices surge.

CME has already adjusted its proposal once in response to objections. It originally proposed to increase the daily limit to 50 cents.

The exchange last widened the limit for corn in March 2008 with an increase to 30 cents from 20 cents. Corn futures at the time were trading around $5.50 a bushel and ended up climbing to a record high of $7.65 a bushel in June of that year. That record fell this year, with the market reaching a new, all-time high of $7.9975 a bushel earlier this month. The nearby contract traded last Monday around $7 a bushel. — WLJ

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