PARIS - Euronext still plans to retain only one wheat futures contract in the medium term, but could choose its older No. 2 version in the face of minimal liquidity in its recently launched No. 3 contract, the European exchange said on Thursday.
Euronext announced on Wednesday it would open 2018 positions for its No. 2 contract <0#BL2:>, reversing previous plans to phase it out by then in favour of the No. 3 contract that has higher quality specifications.
The No. 2 contract is a price benchmark for the European wheat sector and Euronext's biggest commodity market.
The prolonging of the No. 2 contract was requested by option dealers who wanted to be able to trade further-away positions, Olivier Raevel, head of commodities at Euronext, told Reuters.
"Euronext has to let the market choose, and participants have decided to concentrate liquidity in the No. 2 contract," he said.
ADVERTISEMENT
The No. 3 contract was launched in March to offer higher milling quality and a wider physical delivery zone, in response to market upheaval caused by a rain-hit French harvest in 2014.
But the fact this year's harvest yielded much better crop quality has curbed interest in the market for hedging against the No. 3 contract, Raevel said.
He reiterated that the exchange's objective was to operate a single contract after the No. 2 contract adopts the same quality specifications as the No. 3 version as of September 2017, but that the choice of contract would reflect market interest.
Regarding the additional delivery points offered by the No. 3 contract, Euronext had not yet discussed with silo operators whether these could be added to No. 2, Raevel said.
The launch of the No. 3 contract was also seen by traders as a riposte to plans by the world's biggest futures operator, CME Group, to launch a rival European wheat market.
However, CME's efforts have been hampered by difficulties in getting French grain handlers to sign up as delivery silos, with traders citing legal and tax issues.
