CME Group Introduces Sorghum Basis Futures Contract

CME Group is set to launch sorghum basis futures, a new contract that reflects the price difference between sorghum and corn. Trading for this contract is expected to begin on August 24, pending regulatory review.

Sorghum is a versatile commodity used in animal feed, ethanol production, and as an export product. Its premium over corn usually indicates international demand driving up prices, while a deep discount leads domestic buyers to shift towards cheaper sorghum.

CME Group's John Ricci said that 'recent years have seen considerable volatility' in the sorghum-to-corn cash spread, swinging from sharp premiums to steep discounts. The new contract aims to provide market participants with an instrument to hedge against this basis risk.