CME Group Launches Sorghum Basis Futures

Sorghum producers received positive news on July 21 when the CME Group announced plans to launch sorghum basis futures. Trading is set to begin on August 24, pending regulatory review.

Guy Allen, with the Department of Grain Science at Kansas State University, supports this move, citing a lack of balance and proportionality in the sorghum market due to limited price transparency and information flow.

The CME's decision is especially beneficial for Kansas grain sorghum growers, who have often faced country elevators with 'no bid' offers. This has led to $2.50 to $3 basis volatility in sorghum relative to corn, making it difficult for country elevators and exporters to manage risk exposure.

The introduction of a sorghum contract on the CME will provide more accurate price discovery and transparency, mirroring the revised delivery framework for Kansas Hard Red Winter Wheat. This system is based on a Western Corn Belt rail-centric grain transportation system, which will help match the flow of U.S. grain sorghum to primary export markets.