The Commodity Futures Trading Commission has approved CME Group Inc.’s plan to raise the daily trading limits for Chicago Board of Trade corn futures to 40¢/bu. from 30¢ despite resistance to the change from members of the corn industry.
The new limits will go into effect on Aug. 22 for CBOT corn futures, corn options and mini-sized corn futures. Under the CME group proposal, the corn futures daily price limit will be expandable once to 60¢ when at least two contracts close at limit bid or limit offer on the previous trading day. The current 30¢ daily limit for corn futures is expandable to 45¢, then again to 70¢ when at least two contracts close at limit bid or limit offer.
The wider price limits were approved following an extended review period. Comments made to the CFTC on the proposal from corn producers, grain merchants and corn end users were overwhelmingly negative, with the industry participants fearing the wider margins would mean increased price volatility and larger margin calls on futures positions that could put them in financial jeopardy.
Corn market participants have continued to criticize the plan after saying it was a play by CME to boost futures trading volume. "The powers that be think there's some sort of lost volume there that they can capture" with an increased limit, Jerry Gidel, analyst for North America Risk Management Services, a brokerage in Chicago told Dow Jones Newswires on Tuesday.
CME Group said the wider limits were needed to ensure proper price discovery amid historically high corn prices.
"After significant discussion with customers, representative trade groups and the CFTC, we believe increasing daily price limits will result in less-frequent limit moves and will help ensure that our markets provide the most effective means for price discovery and risk management," Dave Lehman, CME's managing director of commodity research and product development, said in a press release.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.