ICE Futures Canada will launch spring wheat and durum contracts early next year to take advantage of Ottawa's planned dismantling of the Canadian Wheat Board's grain monopoly, its chief operating officer said on Thursday.
The spring wheat contract will compete for liquidity with one offered by the Minneapolis Grain Exchange, but will also complement it, while the durum contract will be the only one in the world, said ICE Canada president and chief operating officer Brad Vannan, in an interview with Reuters.
The re-elected Conservative government is aiming to eliminate the board's marketing monopoly on Western Canada's wheat, durum and barley in August 2012, the start of Canada's 2012/13 marketing year. It has not said if it will end the monopoly in stages.
Expansion of ICE Canada's futures offerings are the first signal of an overhaul of Western Canada's grain-marketing system, which has operated under the Wheat Board's monopoly since World War Two. Lifting the monopoly will allow western farmers to sell their wheat, durum and barley to anyone they choose, not just the board.
With grain companies like Viterra, Cargill Inc and Richardson International Ltd allowed to buy directly from farmers, they will need more futures tools to hedge their crop price risk, Vannan said. Building liquidity in a new contract will be a challenge, however.
"It's like pushing a boulder over a hill," Vannan said in ICE Canada's Winnipeg office. "For every step forward, you probably take two steps back. And then you get over the crest and it starts picking up."