KCBT Wheat Futures ContractErica Venancio posted on 6/16/2011Update on Recent HRW Wheat Contract Changes
The new contract terms in place for the KCBT HRW contracts have resulted in wider carrying charges as many experts expected, as well as improved basis in a wide geography.
Since the implementation of the new HRW futures contracts, many have seen an improvement in values. Said one industry insider, "Market conditions have changed to the extent that HRW convergence is no longer concerning people, as HRW bids at KCBT delivery stations are approaching delivery equivalent values. A big change versus a year ago."
The spot rail basis is currently about delivery equivalent for even ordinary protein levels. More recently, market factors such as weather and subsequent reduced production projections may also be factors in the basis recovery.
The changes to the KCBT wheat futures contract, approved by the exchange's membership in November, and by CFTC in January, would increase the base storage rate by 1.5 cents per bushel, with an additional 3-cent-per-bushel harvest storage premium from July through November. Under the KCBT seasonal storage rate rules, the current base storage rate for the KCBT HRW wheat futures contract would increase to 6 cents per bushel per month ($0.00197 per bushel per day), with an additional "harvest storage premium" that would increase the rate to 9 cents per bushel per month ($0.00296 per bushel per day) during the months of July through November. The changes would take effect with the September 2011 futures contract. (source: NGFA)