Reminder on CME delivery procedures during Illinois River closures

By Todd Kemp, Senior Vice President and Treasurer

Following consultation with the NGFA’s Risk Management Committee and other customers, the CME Group in 2019 updated its rule that governs delivery procedures – and, more specifically, barge load-out procedures at elevators regular for delivery – during anticipated closures of the Illinois River waterway for lock-and-dam repairs scheduled this summer.

Provisions of the rule will take effect if repairs result in a majority of regular shipping stations being obstructed for 15 days.  CME has stressed that the rule is designed to have little or no impact on convergence and futures spreads.  Repairs are scheduled to begin July 1 according to the schedule published by the U.S. Army Corps of Engineers.

The CME has published a frequently asked questions document about the rule that may be useful to affected NGFA-member firms.

The relevant CME procedures can be found in Chapter 7 of the CME Rulebook at Rule 703.C.G.(9), which is copied verbatim here:

“(9) In the event that the U.S. Coast Guard and/or U.S. Army Corps of Engineers makes an announcement that river traffic will be obstructed for a period of fifteen days or longer as a result of one of the conditions of impossibility listed in (8) above and if the Exchange determines that such obstruction will affect a majority of regular shipping stations, then the following barge load-out procedures for corn, soybeans, and SRW Wheat at facilities in the St. Louis-Alton Territory and on the Ohio and Mississippi Rivers shall apply to shipping stations upriver from the obstruction

“(a) The maker and taker of delivery may negotiate mutually agreeable terms of performance.

“(b) If the maker and/or the taker elect not to negotiate mutually agreeable terms of performance, then the maker is obligated to provide the same quantity and like quality of grain pursuant to the terms of the shipping certificate(s) with the following exceptions and additional requirements:

“(i) For corn and soybeans, the maker must provide loaded barge(s) to the taker on the Illinois River between the lowest closed lock and St. Louis, inclusive, or on the Mid-Mississippi River between Lock 11 at Dubuque, Iowa and St. Louis, inclusive. For SRW Wheat at Ohio River facilities, the maker must provide loaded barge(s) to the taker on the Ohio River between the lowest closed lock and the Mississippi River, inclusive, or on the Mid-Mississippi River between St. Louis and the Ohio River, inclusive. For SRW Wheat in the St. Louis-Alton Territory and at Mississippi River facilities, the maker must provide loaded barge(s) to the taker on the Mississippi River below the point of obstruction.

“(ii) The loaded barge(s) provided to the taker must have a value equivalent to C.I.F. NOLA, with the maker of delivery responsible for the equivalent cost, insurance and freight.

“(iii) The taker of delivery shall pay the maker barge freight between the issuing facility and NOLA calculated from the relevant barge freight rate reported in the latest available USDA-AMS Transportation Report on the date that loaded barges are provided to the taker as a reimbursement for the cost of barge freight.

“(c) In the event that the obstruction or condition of impossibility listed in (8) above will affect a majority of regular shipping stations, but no announcement of the anticipated period of obstruction is made, then shipment may be delayed for the number of days that such impossibility prevails.”