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Published May 18, 2012, 03:35 PM

Trading hours compromise

A lot of people who buy and sell grain worried that this would be a long, complicated summer. Some, though not all, of their concerns were eased today.

By: Jonathan Knutson, Agweek

A lot of people who buy and sell grain worried that this would be a long, complicated summer. Some, though not all, of their concerns were eased today.

A last-minute compromise over expanded trading hours at the Chicago Board of Trade will reduce the number of additional hours, a reduction requested by grain groups.

The new hours will go into effect May 20, for trade date May 21.

Under the compromise, CBOT reduced its electronic trading hours for grain and oilseeds futures to 21 hours a day from the 22 hours a day that the CBOT first planned. The market has been open for 17 hours a day.

“That one extra hour (the CBOT is shut down) is important,” Bob Zelenka, executive director of the Minnesota Grain and Feed Association, told Agweek.

Further, under the new plan, the CBOT will close from 2 p.m. (CT) to 5 p.m., not the 4 p.m. to 6 p.m. first planned.

The shift in hours also was welcomed by critics of the original schedule.

The compromise “will give market participants, including grain elevators, feed mills, grain processors, exporters and others, additional time during the normal business day to reconcile trading accounts and perform other required accounting and back-office operations – rather than performing those functions after normal business hours,” Randy Gordon, the National Grain and Feed Association’s acting president and vice president for communications and government relations, said in a news release.

The National Grain and Feed Association and the North American Export Grain Association, among other farm groups, had complained the CBOT’s original plan went into effect too quickly and would hurt grain merchants.

Earlier this month, federal regulators approved the original plan that called for 22 hours a day. The CBOT planned to implement the plan on May 20.

On May 18, regulators approved the compromise plan, which also calls for implementation on May 20, Chris Grams, director of corporate communications for CME Group, which owns and operates the CBOT, told Agweek that the CBOT wanted to begin its new 21-hour trading day as soon as possible.

Farm groups had asked regulators to delay expanded trading hours for 30 days to allow for public comment.

USDA reports, volatility

Area grain elevator officials who talked with Agweek before the compromise had mixed views on how the expanded hours might impact their operations. Some officials expressed strong concerns, while others did not.

However, many in the grain industry still worry that extended hours will increase volatility in the grain markets on days on which key U.S. Department of Agriculture reports are released.

In the past, traders have had time to assess data in the reports before trading begins. With extended hours in place, trading already will be under way when the reports are released.

Paul Coppin, general manager of the Reynolds (N.D.) United Cooperative, said he was pleased that CBOT scaled back its extended hours.

However, “I’m still concerned about what will happen when the USDA reports are released,” he said.

USDA has said it will study its procedures for releasing crop reports, but that it hasn’t decided whether to change its release schedule.

Other grain exchanges

The Kansas City Board of Trade scrapped its original plan of 22 hours a day to match those of the CBOT. The Kansas City exchange will begin offering 21 hours a day of trading on May 20.

The Minneapolis Grain Exchange, which earlier this month released plans to expand to 22 hours a day, also announced May 18 that it will begin 21 hours of trading a day, effective May 20.

Like the CBOT, the Kansas City and Minneapolis exchanges will be shut down from 2 p.m. to 5 p.m. (CT).

On May 14, ICE, an Atlanta-based exchange and clearinghouse, expanded its hours for grain contracts to 22 hours a day. The CBOT's original expansion to 22 hours a day was widely seen as a response to ICE's action.

The CBOT, the MGEX and the KCBT all play a big role in determining grain prices paid by area elevators.

So extended trading hours, even when reduced from 22 hours to 21 hours a day, inevitably will impact people who buy and sell grain, elevator officials said.

One of the uncertainties is when and how elevators will determine their daily listed grain bids. Some publications, including Agweek, run listings of those bids.

Though the compromise between the CBOT and the grain groups simplifies matters somewhat, area grain elevator officials still have many questions, Coppin said.

“We’re entering new territory,” he said.