Sorghum Producers Call for Pause on Chicago Futures Contract

The National Sorghum Producers (NSP) is calling on the Commodity Futures Trading Commission (CFTC) to pause and review a planned Chicago futures contract for sorghum. The NSP filed a two-page summary of its concerns with the CFTC, arguing that the current design of the contract could put farmers at risk.

The Chicago Board of Trade (CBOT), operated by the CME Group, filed a self-certification with the CFTC for the initial listing of the sorghum futures contract on August 24. However, NSP leaders are pushing the CFTC to stay implementation of the new contract and evaluate whether CBOT filed a 'false certification.'

NSP's main concerns include liquidity, listed locations for physical deliveries, and regional differences in sorghum prices that could prevent the futures contract from reliably converging with cash markets.

The NSP is not opposed to the idea of a sorghum futures contract but wants it to be 'useful' and help farmers, not hurt them. The organization warns that past sorghum futures contracts failed to sustain trading and without committed commercial hedgers, market-maker support, and deep liquidity, producers could face wide spreads, unreliable price signals, and greater manipulation risk.

The NSP is also concerned that eligible facilities under the contract are derived from an existing Kansas City Hard Red Winter wheat contract, which may not adequately represent the broader U.S. sorghum market. They note that counties around that existing network account for only 19.4% of average U.S. planted sorghum acreage.

According to NSP's summary, state-average sorghum prices in Texas and Kansas have diverged materially, with Texas higher in 37 of 41 months since January 2023. This divergence could lead to a selected cash-bid comparison showing an approximately 87-cent-per-bushel difference between South Texas/Gulf values and an estimated Kansas delivery-area basis.