October 2010 ended with unexpected growth of wheat prices by 1.1%-1.4% on American exchanges which was, nevertheless, immediately set off as early as during the first days of November with a 2%-3% fall and a continuing tendency for depreciation.
In the meantime, as reported by The Times on 1 November, Chicago Mercantile Exchange Group headed by CME CEO Craig Donohue visited Moscow and negotiated with Victor Zubkov, the Russian Vice-Prime-Minister for the agricultural sector of the Russian economy.
Negotiations were aimed at introducing wheat futures in Russia. According to expert forecasts, this step will be mutually beneficial.
In this way CME Group would be able to expand its trading floors by cooperation (possibly, based on the Globex platform that already in place at Chicago Exchange) with leaders of the agrarian sector of Russia, Ukraine and Kazakhstan. The Times observers believe that it will inevitably cooperate with RTS which currently trades futures for Urals and Brent oil and gold.
On the other hand, tools offered by Chicago Board of Trade (CBOT), a trading floor that has traditionally been an international indicator of prices for exported and imported grain crops for decades will be rather useful for Russian producers
, according to the industry’s experts.
Since wheat prices are among the leading indicators of the consumer market and many players are involved in monitoring their dynamics – starting from industry’s analysts and producers to media and regional authorities - futures introduced in conjunction with CME Group will help make price fluctuation forecasts closer to reality. The experts are of the opinion tha
t, when launched, this financial instrument will facilitate certain standardization of products given peculiarities of the product mix, vegetation regions, grain quality and other parameters currently unregulated in the context of the actual spot market of grains in Russia. In addition, such standards can also push up the price of exported Russian wheat in the global market. Chicago Exchange's offer for the Russian Market is also relevant inasmuch as wheat futures contracts will become a natural guarantee of compensation of risks inherent to export contracts and domestic Russian trading agreements. These risks are rather tangible, by the way.
It has been previously announced that because of anomalous heat last summer in Russia it was necessary to introduce a ban on grain and grain products exports until mid 2011 which causes tangible losses as some producers and analysts admit. Wheat prices grew by almost 40 from June through October%.
Some time ago the National Mercantile Exchange (within MICEX) introduced wheat futures contracts with delivery but there are no significant volumes so far. However, the contracts turnover of wheat futures in September demonstrated some growth despite low liquidity: by 3% in the number in contracts and by 15% in rubles. These figures, according to the Exchange, set record highs in terms of the monthly turnover.
What can be recommended to grain traders on future prices of wheat futures? According to Tatiana Ketrar, Analyst of the Market Sentiment Department within the Masterforex-V Trading Academy, the wheat futures prices ranged within $643-765 after a rapid growth in summer this year. Latest bars create the pattern of ‘a triangle’ which is known to be a trend continuation pattern. However, after a global rising trend the price went down to correct itself and each new bar should be monitored to determine prospects of further movement. An upward break from the triangle means an exit from the range and growth at least to $850-868. A break from the lower boundary results in movement to the support level at $643 and a continued ranging. One should be clear about intentions of the futures contract in order to enter the market.
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