ICE Canada plows ahead with grain contracts after 'unusual' year

Thu Dec 13, 2012 11:12am EST
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* New wheat, durum, barley contracts little used

* Steady, high prices left risk management appetite lower

By Rod Nickel

WINNIPEG, Manitoba, Dec 13 (Reuters) - ICE Futures Canada plans to continue offering its seldom traded Canadian grain futures contracts, confident that a set of unusual, but temporary, market conditions prevented them from taking off this year.

ICE Canada launched milling wheat , durum and barley contracts in January to capitalize on the Canadian government's removal of Western Canada's grain marketing monopoly.

But instead of seeing price volatility that would spur the trade to aggressively manage their risk, wheat prices have been high and relatively steady, with fluid grain movement from farms through the commercial handling system -- all in a year in which western farmers gained the ability to sell their grain to any buyer.

"From a farmer's eyes, what more do you want?" said Brad Vannan, president and chief operating officer of ICE Futures Canada, an arm of the Atlanta-based IntercontinentalExchange Inc , in an interview with Reuters. "For people to see value in those tools, they have to perceive risk.

"There are a lot of unusual things that are happening right now, none of which really demonstrate the value of the futures contracts that were built."

In Western Canada, high prices of wheat for livestock feed - the lowest-value wheat grade - put a high floor price into the wheat market, while an abundance of high-protein wheat kept the ceiling low, Vannan said.   Continued...