By Todd Kemp, Senior Vice President of Marketing and Treasurer
The CME Group on July 10 announced long-discussed changes to storage rates for its corn and soybean futures contracts.
For both contracts, storage rates will increase from 5 cents per bushel per month to 8 cents per bushel per month and will be implemented, pending CFTC review, starting with the November 2019 soybean and December 2019 corn futures contracts. The changes, filed with the Commodity Futures Trading Commission, come at the end of a lengthy review of potential revisions to enhance convergence in the two contracts.
By and large, the storage rate increases mirror recommendations made by the NGFA to CME in a June 20 letter. The letter acknowledged that challenges to convergence have occurred in recent years, especially with the soybean futures contract, and the NGFA’s belief that storage rate adjustments that better reflect market conditions were the preferred method to improve contract performance. Further, the NGFA letter referenced internal discussions within its Risk Management Committee concerning whether a variable storage rate (VSR) should be implemented for corn and soybean contracts, as done previously for CME’s hard red winter wheat and soft red winter wheat contracts; a strong majority favored increasing the fixed storage rate as the better solution.
The NGFA has been advised by CME that other recommendations still may be addressed, including a commensurate increase in storage rates for soybean oil and meal contracts.
Additional NGFA recommendations not adopted at this time by CME included the potential to introduce an annual adjustment in corn and soybean futures storage rates to make the contract more responsive to market conditions; and a future analysis of increasing loadout fees at delivery warehouses to better reflect delivery market economics.
The CME announcement can be accessed here.