Spring wheat futures competition heats up

The CME Group on April 14 opened for trading its new Chicago hard red spring wheat futures contract in competition with Miax Futures’ Minneapolis spring wheat futures contract.

The CME Group on Jan. 8 announced a plan to launch physically-delivered hard red spring wheat futures and options, which would allow market participants to buy and sell futures across all major wheat classes in one clearing house. The financial services company in an $8 billion 2007 deal merged with the holding company of the Chicago Board of Trade (CBOT), home of the original soft red winter wheat futures contract. The Kansas City hard red winter wheat futures contract also is traded on the CME’s Globex platform after the Kansas City Board of Trade consolidated its trading floor with its Chicago counterpart in 2013 and ceased operations in 2015. The KCBOT was founded in Kansas City in 1856.

The hard red spring wheat contract specifications posted to the CME Group’s website shows contracts for 5,000 bushels are quoted in cents per bushel, limits price fluctuation to a quarter cent minimum and indicates that trading terminates on the business day prior the 15th day of the contract month.

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Other specifications differ from the benchmark Minneapolis spring wheat futures, including:

• US No. 2 northern and dark northern spring wheat at par with a 3¢-per-bushel premium for US No. 1 northern and dark northern spring wheat.
• Vomitoxin limited to two parts per million or better at par; 20¢ per bushel discount for three parts per million.
• Falling number must test 250 seconds or better at par with discount schedules of 25¢ a bushel for 225 seconds or better and 50¢ a bushel for 200 seconds or better.
• Protein percentages are 13.5% at par; 10¢-per-bushel discount for 13% to 13.4% protein.

The new futures and options compete with Minneapolis spring wheat futures currently traded electronically through Miax Futures Exchange LLC, a wholly owned subsidiary of Miami International Holdings, Inc., since 2020 that was known as the Minneapolis Grain Exchange from its 1881 founding until October 2024. Miax on April 2 announced it would migrate its spring wheat futures from the CME Global platform to trade on a new matching engine called Miax Futures Onyx. That migration is scheduled for June 29.

Miax spring wheat futures also trade in 5,000-bushel contracts and have a quarter-cent minimum price fluctuation, but do not contain a falling number specification. The exchange does specify the following requirements that differ from the new CME contract:

• USDA No. 2 or better dark northern or northern spring wheat with a protein content of 13.5% or higher, with 13% to 13.4% protein deliverable at a discount. Those grades are deliverable at a 3¢-a-bushel discount.
• Vomitoxin may not exceed two parts per million (ppm) deoxynivalenol (vomitoxin) level, though 2 ppm to 3 ppm vomitoxin levels are deliverable at a discount.

The trade has been considering the ramifications of a competing spring wheat futures market since it was announced.

“We have Chicago spring wheat trading the same time we have Minneapolis spring wheat trading, and we’re just going to have to see who migrates where,” said Mike O’Dea, risk management consultant, StoneX, Kansas City, Missouri, US. “I think the cash market, the millers and the big cash traders all stay with the current Minneapolis contract. I think you’ll see the speculative traders who want to see more volume and more liquidity will trade Chicago. But no one wins in the end. There’s only room for one spring wheat contract, and I don’t know who that is yet.”

Still unknown are the logistical considerations for elevators, millers and bakers looking to align bookings to reach completed flour contracts.

“Say a terminal selling wheat has hedges in Chicago and I’m a miller who has my hedges in Minneapolis,” O’Dea said. “In that case, we can’t exchange. If I’m a miller, I’m going to want to know where the supplier’s hedges are at.”

Ahead of the CME spring wheat futures launch, traders were speculating.

“More or less, it’s just for buyers and seller to know, but I don’t think it will trade much,” a wheat trader said. “I think (CME spring wheat futures) will trade a spread based from Miax, meaning it doesn’t necessarily act on its own. But it will be interesting to see what kind of volume it gets. It comes down to either the front-end hedge, in which the farmer or commercial has to tell the miller he’s using CME going forward, or it’s the opposite where the end-use company says it wants to switch and suggests the front end makes the switch. I wouldn’t say there’s anything wrong with Miax, some of the contract amendments for the September 2026 contract are pretty good. Just in general, people have a tough time changing. I don’t see why they would change just for the sake of change.”

The CME Group July 2025 spring wheat future at closed at $6.21 per bushel, down 7¼¢, which compared with Miax July spring wheat, which closed at $6.19 per bushel, down 9½¢.

Source: World Grain