Moscow Exchange sows seeds of potential with launch of wheat futures contracts

The Derivatives Market at the Moscow Exchange (MOEX) has launched trading of physically settled Russian grain futures contracts. The product is set to replace a swap contract that closed earlier this year.

The contract, developed in close cooperation with VTB Capital, will reportedly meet the needs of various market participants including agricultural producers, processors and wheat exporters, as well as banks, brokers and their clients.

The deliverable contract is quoted in rubles per ton. Each contract represents 25 tons of fourth-class wheat, which will be delivered to elevators in the Russian southern region of Voronezh in March, September and December.

“Russia is the world’s largest grain exporter, and Russian wheat has a big impact on stability of the global grain market. However, there is no universal price benchmark for wheat in Russia,”said Igor Marich, the managing director for sales and business Development at Moscow Exchange.

“We hope that the new futures will become this benchmark and allow grain market participants to use the convenient and reliable mechanism to hedge price risk.”

MOEX had previously operated a grain trading scheme on behalf of the National Mercantile Exchange, where physical grain was used as the underlying asset in certified elevators for swap transactions. Last year, inland derivative trading of Russian grains was halted following a series of thefts that jeopardized a swap scheme run by MOEX and cost the company millions of dollars.

“The launch of the grain delivery futures is an important step in the development of the Russian derivatives market,” said Atanas Djumaliev, head of global ocmmodities at VTB Capital.

“At the same time, we expect that in the future this instrument will also be of interest to large global players who are looking for additional opportunities to hedge risks.” 

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