The CME Group announced this week its intention to increase the storage charge that approved regular rice warehouses may charge holders of outstanding warehouse receipts. The proposed change, pending Commodity Futures Trading Commission (CFTC) approval, would increase the current charge of 10 cents per hundredweight to 12.5 cents per hundredweight starting Sept. 18. This change is the result of significant outreach and information gathering by the CME since late last year.
"We in the rice industry are pleased that the CME Group has decided to pursue at least one change to the rice contract in an effort to improve convergence and performance of the contract," said John Owen, Louisiana rice producer and chairman of USA Rice Federation's Rice Futures Contract Working Group. The increased focus and attention to the need to address convergence issues in the rice futures contract is largely a result of efforts by the USA Rice Federation's Rice Futures Contract Working Group, chaired by Owen. "Our goal is to have a well-functioning, liquid futures contract for rice that meets the risk management and price discovery needs of all industry participants," Owen said. The importance of this is increasing as commodity markets become more volatile and as more Federal farm and risk management policies are built around the futures prices for commodities.
"We look forward to seeing this initial change implemented, and tracking what impact it has on the contract performance," he said. "Our industry remains open and interested in considering other potential changes -- delivery territory expansion and delivery instrument -- but we believe it is important to proceed methodically and with caution so as to not disrupt the rice contract. Anything that drives out market participants will only weaken the contract and decrease the market liquidity, which would be harmful to all industry participants."