CME Introduces New Sorghum Basis Contract Amid Industry Concerns
The Chicago Mercantile Exchange (CME) has introduced its new sorghum basis contract, designed to reduce price volatility in the market. The contract is set to launch on August 24 and aims to create a benchmark for the crop that better reflects regional supply and demand factors.
National Sorghum Producers (NSP) has raised concerns about the liquidity and delivery points of the new contract, citing past failures of sorghum futures contracts to sustain trading. Without committed commercial hedgers and market-maker support, producers may face wide spreads and unreliable price signals.
The CME contract allows for delivery at any eligible facility registered for delivery on the Kansas City Hard Red Winter Wheat futures contract, but NSP is concerned that this will create issues for western Kansas growers and Texas growers who are not represented in the proposed delivery system.