commodity investing

commodity futures news

June 27th, 2013

Commodity Futures – CME Group Inc., the world’s largest futures-exchange owner, is closing its wheat-trading pit in Kansas City today, ending a 157-year run, before shifting transactions next week to the Chicago Board of Trade.

CME acquired the Kansas City Board of Trade in October for $126 million, gaining control of a wheat-futures market that was the largest in the world behind the CBOT. With most Kansas City contracts already bought and sold on CME’s Globex electronic system, the company elected to halt face-to-face transactions in the city, where trading began in 1856.

Pit traders in Chicago will be able to buy and sell Kansas City futures face to face starting July 1, according to the exchange. The contracts are for high-protein, hard, red winter wheat used to make bread. Chicago futures are for soft, red winter wheat used mostly in cookies and cakes.

“There are more people that trade in Chicago and have the rights to trade all the different contracts, so if you stick the KCBT contract in there and make it part of the menu, you might pick up people who previously hadn’t been trading Kansas City wheat,” William Tierney, the chief economist at AgResource Co. in Chicago, said in a telephone interview.

Trading has migrated to Globex from the pits, where buyers and sellers shout orders and use hand signals. Of the 11.1 million trades on the CBOT in the first five months of 2013, open outcry accounted for 152,315, or 1.4 percent, exchange data show. In Kansas City, 7 percent of wheat trades occurred in the pit, Damon Leavell, a CME spokesman, said by telephone, without giving exact figures.

The price of Chicago futures has tumbled 13 percent this year as the government forecasts record global production. Kansas City futures are down almost 16 percent.

Starting next week, Chicago pit traders will be able to buy and sell KCBT weekly wheat options, KCBT-CBOT wheat-spread options and Minneapolis Grain Exchange-KCBT wheat-spread options, according to the CME. (CME)

- Tony C. Dreibus in Chicago at Bloomberg.

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