 | Brice Elnicki is vice president of KAMO GRAIN INC at 3708 North Free King Hwy in Pittsburg, KS. A graduate of the University of Arkansas, specializing in grain merchandising, he also serves on the KGFA legislative committee. Kamo Grain started as a small, family owned, country elevator in 1990, has now grown to serve producers and elevators all over the four state area with their grain marketing needs. For more information or to reach Brice call 620-232-5800.
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Agriculture
2012-06-20 11:22:08
Explaining new market hours
Q: There have been a lot of revisions to market trading hours of late. Can you please try and explain the new extended
trading hours?
A: It has been a confusing topic, and one that may take grain elevators and producers awhile to get used to (although there are some good advantages). Below I will try to explain, with an overview of the new CME Group CBOT extended trading hours.
As of Sunday, May 20th, the Chicago Mercantile Group (CME Group) expanded the Chicago Board of Trade (CBOT) Grain and Oilseed trading hours to 21 hours per day. Prior to the 20th, CME/CBOT trading hours opened at 9:30 am and closed at 1:15 pm, Monday thru Friday, and night trade opened at 6:00 pm and closed at 6:00 am Sunday night thru Friday morning at 6:00 am. Trading hours are now 5:00 a.m. to 2:00 p.m. CST Sunday to Friday, excluding holidays. Although trading continues til 2:00 p.m., daily; settlements’ prices will still be based on market activity at 1:15 p.m. Pending final review by the Commodities Futures Trading Commission (CFTC), the market final settlement will be moved to the 2:00 p.m. close. These expanded hours provide advantages to both grain elevators and grain producers. While grain elevators can now better manage price risk, grain producers now have more time to price unsold grain as well as possibly capture market rallies. The expanded hours could possibly have some disadvantages as well. For example, USDA reports will now be released during market hours. Currently, USDA reports are released at 7:30 AM CST, and when the grain markets didn’t open until 9:30 am, the 2 hour gap was plenty of time to read through the reports and get a feel for what was coming once trading started, whether it was limit up or down, or no major change. Now, trade will be open and reports will come out, and the race will be on to try and figure out what is expected. It will definitely add to the already volatile markets, but in a sense with the extended hours and only one close this may allow the markets to find their range easier, and not have to work around a close at 1:15 pm, then an open at 6pm, and another close at 6am, followed by another open at 9:30 am. An additional problem is basing the day’s closing prices off a 1:15 pm settlement, but allowing the markets to continue to trade for a straight, uninterrupted 21 hours. This has and will continue to cause some confusion, primarily because the markets are constantly changing and the price of a specific commodity could be higher or lower at 1:50pm then it was at 1:15pm, yet at 2:00pm, the closing bids will be based off the 1:15pm settlement. Eventually, it is thought that the 1:15pm settlement will be eliminated, and the settlement will be moved to 2:00pm.
There is no doubt that a few glitches will need to be worked out, and some buyers and sellers are still unsure how to handle the new trading hours. But all in all, this is a good thing for producers, elevators, and end users, providing a longer trading platform so that prices can be discovered easier and limit price risk.
More information can be found at www.cmegroup.com
