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Last month, the Chicago Mercantile
Exchange (CME) continued
to gather feedback from throughout
the rice industry with regard
to the hypothetical contract changes for the
rough rice futures contract.
These changes include the following:
1) increase storage charges to improve convergence
from 34/100 cents-per-day to
40/100 cents-per-day, 2) expand the delivery
territory to include Mississippi,
Crittenden, Lee and Phillips Counties in
Arkansas, while allowing deliveries from
facilities on either side of the Mississippi
River from approximately the Missouri and
Arkansas state lines in Mississippi County
and 3) change the delivery instrument from
a warehouse receipt to a shipping certificate.
Final public comment period closed
on March 9, 2012, and, as of this writing,
there has not been any announcement on
a decision.
New Players In The Game
What does this mean to rice farmers?
The US Rice Producers Association feels it
is of extreme importance and responded to
the request from the CME stating the organization’s
board of directors fully supports
all three changes under consideration.
Of particular interest is expanding the
delivery territory. Why not expand from
the state line with Missouri all the way to
the Louisiana state line or mile marker
531? Sooner or later demand will pick up,
and the expansion of delivery would allow
more options against futures sales by farmers,
if necessary, thereby making the hedge
positions more useable for more people.
New players getting into the game, especially
the major grain trading businesses
who are experienced with trading basis,
have access to credit lines, etc., bring a
whole new angle that can only help rice
farmers. Major grain businesses have been
fenced out of the delivery process since the
rice futures contract from the beginning.
Currently, this ability is concentrated in far
too few hands and, in the opinion of the US
Rice Producers Association, facilitates
activity that may border on monopoly to
the virtual exclusion of the farmers who
are the intended beneficiaries of rice
futures in the first place.
More players in the market should yield
more competition and encourage the needed
convergence in cash and futures. It is
important that all three changes be implemented,
as they can only help in leveling
the playing field for everyone who uses
rice futures. Due to its relatively small size,
the rice farming industry needs more
involvement and alternatives.
Taking Steps Long Overdue
Today’s market is far different than the
past when the river had little rough rice
traffic on it, but now rough rice totals more
than 40 percent of our exports. Unfortunately,
it was said more than once by some
that rice farmers do not understand these
technical changes, yet we all know that
without farmer efforts there never would
have been a rough rice futures contract in
the beginning.
The steps taken by the CME to resolve a
crippling situation of our system is long
overdue. At the moment, the only certified
warehouses are owned and controlled by
cooperatives and/or private merchandisers.
Expanding the territory, gaining new players,
alternatives, increased competition
sounds so….so American.
We appreciate and applaud the CME for
addressing these positive potential changes
to the rice futures contract. They can only
benefit the broad market and encourage it
to be used more widely by rice farmers in
all Southern states.
In the meantime, we will keep our
fingers crossed while waiting for the
final decision!
For more, visit www.usriceproducers.com. |
