Exchange operator Euronext is looking at sugar, biofuels and metals as potential markets as it expands in commodities following an overhaul of its dairy derivatives, it said on Tuesday. Euronext, which has commodity contracts covering cereal and oilseed products, has highlighted the sector as a growth area as competition in its main market, equities, has heated up and following its spin-off from Intercontinental Exchange last year.
After losing most of its commodities team during the split from ICE, which kept its London-based commodity markets, Euronext has since recruited specialists in vegetable oils, biodiesel and metals, Nicholas Kennedy, its head of business development for commodities, said. "We want to diversify," he told a press presentation. As operator of the Paris, Amsterdam, Brussels and Lisbon bourses, Euronext has been battling competitors such as BATS Chi-X Europe to preserve its European equity market share while keeping a tight rein on costs.
Kennedy said it was also considering the potential for sugar derivatives as the European Union prepares for the liberalisation of its production quota regime in 2017, he said. Euronext said on Friday it planned to launch the dairy products on its Amsterdam market at the end of the first quarter to coincide with the abolition of EU milk quotas. The exchange is replacing an unsuccessful skimmed milk powder contract launched in 2011 with a wider offering of butter, skimmed milk powder and whey powder derivatives aimed at tapping into expected demand for pricing tools as EU production is liberalised.
The scrapping of quotas would expose EU producers more to volatile world prices but also bring the chance to meet growing demand from Asia and Africa, consultancy Agritel, a partner in Euronext's new dairy market, said at the presentation. EU milk production could rise by 11 million tonnes, or 8 percent, by 2020 compared with the 2013 level, it said, arguing that a pullback in market prices linked to a Russian food embargo did not change the bullish outlook.