CME Group Introduces New Sorghum Futures Contract
The Chicago Mercantile Exchange (CME) Group is set to introduce a new futures contract for sorghum, a grain widely used in animal feed and ethanol production. Trading is expected to begin on August 24, pending regulatory approval.
Sorghum has become an increasingly important crop due to strong demand from the livestock feed sector, export markets, and the growing biofuels industry, according to CME Group. The new contract will track the price difference between sorghum and corn, two grains widely used for both animal feed and ethanol production.
CME Group's John Ricci, Managing Director and Global Head of Agricultural Products, noted that while sorghum prices generally move in line with corn over the long term, geopolitical events and regional shifts in supply and demand can cause significant swings in the price spread. The new futures contract will give market participants a more precise instrument to hedge that basis risk.
The contracts will be physically settled through truck or rail deliveries from a network of grain elevators in Kansas, the largest sorghum-producing state in the United States. Deliveries will use the existing Kansas City Hard Red Winter Wheat delivery network.