Post on 13-Nov-2021
transcript
Recent Delivery Performance of CME Corn, Soybean, and Wheat Futures Contracts
Scott H. Irwin, Philip Garcia, Darrel L. Good, and Eugene L. Kunda
Delivery Location Basis on the First Day of Expiration for CME Corn Futures, Illinois River North of Peoria,
December 2001-September 2008
-60
-50
-40
-30
-20
-10
0
10D
ec-0
1
May
-02
Sep-
02
Mar
-03
Jul-0
3
Dec
-03
May
-04
Sep-
04
Mar
-05
Jul-0
5
Dec-
05
May
-06
Sep-
06
Mar
-07
Jul-0
7
Dec-
07
May
-08
Sep-
08
Contract Expiration Month
Bas
is (c
ents
/bu.
)
Delivery Location Basis on the First Day of Expiration for CME Soybean Futures, Illinois River North of Peoria,
November 2001-September 2008
-100
-80
-60
-40
-20
0
20N
ov-0
1M
ar-0
2Ju
l-02
Sep-
02Ja
n-03
May
-03
Aug-
03N
ov-0
3M
ar-0
4Ju
l-04
Sep-
04Ja
n-05
May
-05
Aug
-05
Nov
-05
Mar
-06
Jul-0
6Se
p-06
Jan-
07M
ay-0
7Au
g-07
Nov
-07
Mar
-08
Jul-0
8Se
p-08
Contract Expiration Month
Bas
is (c
ents
/bu.
)
Delivery Location Basis on the First Day of Expiration for CME Wheat Futures, Toledo, December 2001-September 2008
-200-180-160-140-120-100-80-60-40-20
020
Dec
-01
May
-02
Sep-
02M
ar-0
3
Jul-0
3D
ec-0
3M
ay-0
4
Sep-
04M
ar-0
5
Jul-0
5De
c-05
May
-06
Sep-
06
Mar
-07
Jul-0
7D
ec-0
7
May
-08
Sep-
08
Contract Expiration Month
Bas
is (c
ents
/bu.
)
Perfect Basis Predictability
-100
-80
-60
-40
-20
0
20
40
60
80
100
-100 -80 -60 -40 -20 0 20 40 60 80 100
x = Initial Basis (cents/bu.)
y =
Cha
nge
in B
asis
(cen
ts/b
u.)
Predictability of CBOT Corn Basis Change to First Day of Delivery, All Delivery Locations Pooled, December 2001-
September 2008
Dec 2001 - Dec 2005y = -0.87x - 0.61
R2 = 0.87
Mar 2006 - Sep 2008y = -0.28x + 1.02
R2 = 0.07-30
-20
-10
0
10
20
30
40
50
60
70
-70 -60 -50 -40 -30 -20 -10 0 10 20
x = Initial Basis (cents/bu.)
y =
Cha
nge
in B
asis
(cen
ts/b
u.)
Note: September 2005 observations omitted
Predictability of CBOT Soybean Basis Change to First Day of Delivery, All Delivery Locations Pooled,
November 2001-September 2008
Nov 2001 - Nov 2005y = -0.87x - 9.03
R2 = 0.78
Jan 2006 - Sep 2008y = -0.48x - 10.99
R2 = 0.31-100
-80
-60
-40
-20
0
20
40
60
80
-120 -100 -80 -60 -40 -20 0 20 40 60 80 100
x = Initial Basis (cents/bu.)
y =
Cha
nge
in B
asis
(cen
ts/b
u.)
Note: September 2005 observations omitted
Predictability of CBOT Wheat Basis Change to First Day of Delivery, All Delivery Locations Pooled,
December 2001-September 2008
Dec 2001- Dec 2005y = -0.76x + 2.65
R2 = 0.48
Mar 2006 - Sep 2008y = 0.003x + 4.02
R2 = 0.00 -80
-60
-40
-20
0
20
40
60
80
100
-300 -250 -200 -150 -100 -50 0 50
x = Initial Basis (cents/bu.)
y =
Cha
nge
in B
asis
(cen
ts/b
u.)
Maine Potato Futures
"If improvements are not made in the Maine futures contract, then the banning of trading in this contract might be considered. But specific prohibitions of economic activity are usually unwise, and if the market continues to behave badly, the question likely will become mute. Few traders are likely to use a bad market, and the market could very well die of natural causes." (p. 177)
Committee on Agriculture, Nutrition, and Forestry, United States Senate, "Potato Futures Study", 96th Congress, 1st session, U.S. Government Printing Office, November 5, 1979
A Perplexing Economic Problem
• Persistence of non-convergence• Magnitude of non-convergence• Inconsistencies among commodities
and over time• Seasonality• Most serious for wheat
Key Role of the Carry
• When carry (spread) is large:– Incentive to hold delivery instrument and
earn carry by hedging in the next contract– Futures delivery does not lead to load out
(movement) in the cash market– Basis widens due to asymmetry in ability
to force convergence
• Bottom line: Arbitrage link between cash and futures broken
% Full Cost of Carry Calculation
• % = [(F2 – F1)/(Storage + Interest Costs)]*100
• F2 = Price of next nearest to expiration futures contract
• F1 = Price of nearest to expiration futures contract
• Storage = CME contract rate x # days• Interest = (3 mo. T-bill rate)/365 x # days
Daily Spread between Nearest and Next Nearest to Expiration Contracts for CME Corn Futures, September 2001-September
2008 (3 mo. T-bills)
0%
20%
40%
60%
80%
100%
120%
140%
160%01
-Sep
-01
01-M
ar-0
2
01-S
ep-0
2
01-M
ar-0
3
01-S
ep-0
3
01-M
ar-0
4
01-S
ep-0
4
01-M
ar-0
5
01-S
ep-0
5
01-M
ar-0
6
01-S
ep-0
6
01-M
ar-0
7
01-S
ep-0
7
01-M
ar-0
8
01-S
ep-0
8
Date
Perc
ent o
f Ful
ly C
arry
Daily Spread between Nearest and Next Nearest to Expiration Contracts for CME Soybean Futures, September 2001-
September 2008 (3 mo. T-bills)
0%
20%
40%
60%
80%
100%
120%
140%
160%01
-Sep
-01
01-M
ar-0
2
01-S
ep-0
2
01-M
ar-0
3
01-S
ep-0
3
01-M
ar-0
4
01-S
ep-0
4
01-M
ar-0
5
01-S
ep-0
5
01-M
ar-0
6
01-S
ep-0
6
01-M
ar-0
7
01-S
ep-0
7
01-M
ar-0
8
01-S
ep-0
8
Date
Perc
ent o
f Ful
l Car
ry
Daily Spread between Nearest and Next Nearest to Expiration Contracts for CME Wheat Futures, September 2001-September
2008 (3 mo. T-bills)
0%
20%
40%
60%
80%
100%
120%
140%
160%01
-Sep
-01
01-M
ar-0
2
01-S
ep-0
2
01-M
ar-0
3
01-S
ep-0
3
01-M
ar-0
4
01-S
ep-0
4
01-M
ar-0
5
01-S
ep-0
5
01-M
ar-0
6
01-S
ep-0
6
01-M
ar-0
7
01-S
ep-0
7
01-M
ar-0
8
01-S
ep-0
8
Date
Perc
ent o
f Ful
l Car
ry
Total Deliveries of CME Corn Futures, December 2001-September 2008
0
20
40
60
80
100
120
140
160
Dec
-01
Jun-
02
Dec
-02
Jun-
03
Dec
-03
Jun-
04
Dec
-04
Jun-
05
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Contract Expiration Month
Del
iver
ies
(mil.
bu.
)
Total Deliveries of CME Soybean Futures, December 2001-September 2008
0
20
40
60
80
100
120
140
160
Nov
-01
May
-02
Nov
-02
May
-03
Nov
-03
May
-04
Nov
-04
May
-05
Nov
-05
May
-06
Nov
-06
May
-07
Nov
-07
May
-08
Contract Expiration Month
Del
iver
ies
(mil.
bu.
)
Total Deliveries of CME Wheat Futures, December 2001-September 2008
0
20
40
60
80
100
120
140
160
Dec
-01
Jun-
02
Dec
-02
Jun-
03
Dec
-03
Jun-
04
Dec
-04
Jun-
05
Dec
-05
Jun-
06
Dec
-06
Jun-
07
Dec
-07
Jun-
08
Contract Expiration Month
Del
iver
ies
(mil.
bu.
)
Barge Lineup for Load Out through CME Corn and Soybean Futures Delivery System, January 2003- September 2008
0
10
20
30
40
50
60
70
801-
Jan-
031-
Apr
-03
1-Ju
l-03
1-O
ct-0
31-
Jan-
041-
Apr-
041-
Jul-0
41-
Oct
-04
1-Ja
n-05
1-A
pr-0
51-
Jul-0
51-
Oct
-05
1-Ja
n-06
1-A
pr-0
61-
Jul-0
61-
Oct
-06
1-Ja
n-07
1-A
pr-0
71-
Jul-0
71-
Oct
-07
1-Ja
n-08
1-A
pr-0
81-
Jul-0
8
Date
Num
ber o
f Bar
ges
Outstanding Shipping Certificate Registrations for CME Corn Futures, July 2003- September 2008
0
5
10
15
20
25
30
35
4011
-Jul
-03
11-O
ct-0
3
11-J
an-0
411
-Apr
-04
11-J
ul-0
4
11-O
ct-0
4
11-J
an-0
511
-Apr
-05
11-J
ul-0
5
11-O
ct-0
5
11-J
an-0
611
-Apr
-06
11-J
ul-0
6
11-O
ct-0
6
11-J
an-0
711
-Apr
-07
11-J
ul-0
7
11-O
ct-0
711
-Jan
-08
11-A
pr-0
811
-Jul
-08
Date
Reg
istr
atio
ns (m
il. b
u.)
Outstanding Shipping Certificate Registrations for CME Soybean Futures, July 2003- September 2008
0
5
10
15
20
25
30
35
4001
-Jul
-03
01-O
ct-0
3
01-J
an-0
4
01-A
pr-0
4
01-J
ul-0
4
01-O
ct-0
4
01-J
an-0
501
-Apr
-05
01-J
ul-0
5
01-O
ct-0
5
01-J
an-0
601
-Apr
-06
01-J
ul-0
6
01-O
ct-0
6
01-J
an-0
7
01-A
pr-0
701
-Jul
-07
01-O
ct-0
7
01-J
an-0
8
01-A
pr-0
8
01-J
ul-0
8
Date
Reg
istra
tions
(mil.
bu.
)
Stocks or Shipping Certificates Registered for Delivery of CME Wheat Futures, July 2003- September 2008
0
5
10
15
20
25
30
35
4001
-Jul
-03
01-O
ct-0
3
01-J
an-0
4
01-A
pr-0
4
01-J
ul-0
4
01-O
ct-0
4
01-J
an-0
501
-Apr
-05
01-J
ul-0
5
01-O
ct-0
5
01-J
an-0
601
-Apr
-06
01-J
ul-0
6
01-O
ct-0
6
01-J
an-0
7
01-A
pr-0
701
-Jul
-07
01-O
ct-0
7
01-J
an-0
801
-Apr
-08
01-J
ul-0
8
Date
Reg
istr
atio
ns (m
il. b
u.)
Chicago St.L
Percent of Full Carry on FPD,FND,FDD vs Basis for CME Wheat Futures, Toledo, March 2000-December 2008
Regression Model for Basis on First Day of Delivery
1. Contract dummy variables to represent seasonal effects
2. Open interest variable to represent congestion effects (long or short squeezes)
3. Piecewise linear variable to represent cost of carry effects
100 %
Basis
+
-
Regression Model Estimation Results for Delivery Location Basis on the First Day of Delivery for CME Corn Futures, Illinois River North of
Peoria, December 2001- September 2008
Dependent Variable: ILRVNMethod: Least SquaresDate: 09/29/08 Time: 21:07Sample: 1 35Included observations: 35Newey-West HAC Standard Errors & Covariance (lag truncation=3)
Coefficient Std. Errot-Statistic Prob.
C -6.77 7.10 -0.95 0.35Z 16.78 10.17 1.65 0.11H 13.67 8.74 1.56 0.13K 13.83 8.01 1.73 0.10N 4.87 7.64 0.64 0.53OI 0.00 0.00 -1.67 0.11CARRY -7.06 2.95 -2.39 0.02INT80 -94.83 18.58 -5.10 0.00
R-squared 0.67 Mean dependent -13.44Adjusted R-squared 0.59 S.D. dependent 16.52S.E. of regression 10.59 Akaike info crite 7.76Sum squared resid 3028.73 Schwarz criterio 8.11Log likelihood -127.72 Hannan-Quinn c 7.88F-statistic 7.96 Durbin-Watson 2.37Prob(F-statistic) 0.00
-70
-60
-50
-40
-30
-20
-10
0
10
-0.8 -0.4 0.0 0.4 0.8 1.2
CARRY
ESTLINEILRVN
Regression Model Estimation Results for Delivery Location Basis on the First Day of Delivery for CME Soybean Futures, Illinois River
North of Peoria, December 2001- September 2008Dependent Variable: ILRVNMethod: Least SquaresDate: 09/29/08 Time: 21:23Sample: 1 49Included observations: 49Newey-West HAC Standard Errors & Covariance (lag truncation=3)
Coefficient Std. Errot-StatistProb.
C -31.30 11.41 -2.74 0.01X 3.09 14.21 0.22 0.83F 17.64 11.78 1.50 0.14H 18.34 13.55 1.35 0.18K 14.00 12.20 1.15 0.26N -5.44 11.83 -0.46 0.65Q 1.88 8.82 0.21 0.83OI 0.00 0.00 0.90 0.37CARRY -0.49 0.68 -0.72 0.48INT80 -133.36 30.52 -4.37 0.00
R-squared 0.43 Mean depende -25.92Adjusted R-squared 0.30 S.D. dependen 21.00S.E. of regression 17.61 Akaike info cr 8.76Sum squared resid 12100.97 Schwarz criter 9.14Log likelihood -204.50 Hannan-Quinn 8.90F-statistic 3.25 Durbin-Watso 1.47Prob(F-statistic) 0.00
-120
-100
-80
-60
-40
-20
0
-1.0 -0.5 0.0 0.5 1.0 1.5
CARRY
ESTLINEILRVN
Regression Model Estimation Results for Delivery Location Basis on the First Day of Delivery for CME Wheat Futures, Toledo, December
2001- September 2008
Dependent Variable: TOLEDOMethod: Least SquaresDate: 09/10/08 Time: 13:35Sample: 1 35Included observations: 35Newey-West HAC Standard Errors & Covariance (lag truncation=3)
Coefficient Std. Errot-StatistProb.
C 24.01 12.38 1.94 0.06Z 24.66 20.53 1.20 0.24H 11.64 14.56 0.80 0.43K -3.32 15.41 -0.22 0.83N 7.58 19.95 0.38 0.71OI -0.01 0.00 -2.52 0.02CARRY -7.04 16.20 -0.43 0.67INT86 -157.70 71.94 -2.19 0.04
R-squared 0.62 Mean depende -26.04Adjusted R-squared 0.52 S.D. dependen 42.34S.E. of regression 29.23 Akaike info cri 9.79Sum squared resid 23069.29 Schwarz criter 10.14Log likelihood -163.25 Hannan-Quinn 9.91F-statistic 6.34 Durbin-Watso 1.70Prob(F-statistic) 0.00
-200
-160
-120
-80
-40
0
40
-0.5 0.0 0.5 1.0 1.5
CARRY
ESTLINETOLEDO
Why Did the Carry Become So Large?
• CME storage rates too low– Maybe for wheat, according to most recent
CME storage rate survey• Rolling of positions by index funds• Risk premium (Pirrong)
– Positive shock to variance of fundamental uncertainty increases the precautionary demand for stocks
– Leads to an increase in the expected price of storage, as reflected in the spreads between near and deferred futures
2008 CME Storage Cost Survey• Current Storage Rates are approximately 5
cents per bushel per month in wheat and 4.5 cents per bushel per month in soybeans and corn. The soybean and corn storage rates will increase to 5 cents per bushel per month in November and December respectively.
• Storage Rate Survey respondents reported an average 18.47 cents per bushel minimum storage charges from harvest until January 1 and then 3.58 cents per month thereafter. Respondents who broke down their storage charges reported corn storage at 3.65 cents per month; soybean storage at 4.13 cents per month; and wheat storage at 6.67 cents per month.
2008 CME Storage Cost Survey
• Storage Rate Survey respondents report that building new permanent storage costs, on average, $2.19 per bushel. An elevator who borrows $2.19 for five years at 6% interest would face monthly payments of 4 cents per month for 60 months. Thus, an elevator financing new storage space would expect to receive, on average, more than 4 cents per bushel per month in order to effect a positive return on new-storage investment not counting operating expenses.
Goldman Roll Effect in the Nearby Futures Spread
F2 - F1
Expiration of Contract 1
0
Beginning of Roll Window
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Corn Futures,
December 2001-September 2008
-12%
-8%
-4%
0%
4%
8%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001Z-2003Z
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Corn Futures,
December 2001-September 2008
-12%
-8%
-4%
0%
4%
8%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001Z-2003Z
2004H-2005Z
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Corn Futures,
December 2001-September 2008
-12%
-8%
-4%
0%
4%
8%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001Z-2003Z
2004H-2005Z
2005H-2008U
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Soybean Futures,
November 2001-September 2008
-12%
-8%
-4%
0%
4%
8%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001X-2003X
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Soybean Futures,
November 2001-September 2008
-12%
-8%
-4%
0%
4%
8%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001X-2003X
2004F-2005X
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Soybean Futures,
November 2001-September 2008
-12%
-8%
-4%
0%
4%
8%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001X-2003X
2004F-2005X
2006F-2008N
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Wheat Futures,
December 2001-September 2008
-15%
-10%
-5%
0%
5%
10%
15%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage 2001Z-2003U
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Wheat Futures,
December 2001-September 2008
-15%
-10%
-5%
0%
5%
10%
15%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001Z-2003U
2003Z-2005U
Deviation of Nearby Spread from Average Percent of Full Carry during the Goldman Roll Window, CME Wheat Futures,
December 2001-September 2008
-15%
-10%
-5%
0%
5%
10%
15%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Day of the Roll Month (GSCI Rolls on Business Days 5-9)
Spre
ad D
evia
tion
from
15-
day
Ave
rage
2001Z-2003U
2003Z-2005U
2005Z-2008U
Nearby CME Corn Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
100
200
300
400
500
600
700
80004
-Jan
-04
02-J
ul-0
4
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
08-D
ec-0
8
06-J
un-0
9
03-D
ec-0
9
01-J
un-1
0
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
21-M
ay-1
2
17-N
ov-1
2
Date
Pric
e (c
ents
/bu.
)
March 12, 2004
Nearby CME Corn Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
100
200
300
400
500
600
700
80004
-Jan
-04
02-J
ul-0
4
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
08-D
ec-0
8
06-J
un-0
9
03-D
ec-0
9
01-J
un-1
0
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
21-M
ay-1
2
17-N
ov-1
2
Date
Pric
e (c
ents
/bu.
)
September 14, 2005
March 12, 2004
Nearby CME Corn Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
100
200
300
400
500
600
700
80004
-Jan
-04
02-J
ul-0
4
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
08-D
ec-0
8
06-J
un-0
9
03-D
ec-0
9
01-J
un-1
0
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
21-M
ay-1
2
17-N
ov-1
2
Date
Pric
e (c
ents
/bu.
)
March 12, 2004
September 14, 2005
September 14, 2006
Nearby CME Corn Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
100
200
300
400
500
600
700
80004
-Jan
-04
02-J
ul-0
4
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
08-D
ec-0
8
06-J
un-0
9
03-D
ec-0
9
01-J
un-1
0
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
21-M
ay-1
2
17-N
ov-1
2
Date
Pric
e (c
ents
/bu.
)
March 12, 2004
September 14, 2005
September 14, 2006
March 14, 2007
Nearby CME Corn Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
100
200
300
400
500
600
700
80004
-Jan
-04
02-J
ul-0
4
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
08-D
ec-0
8
06-J
un-0
9
03-D
ec-0
9
01-J
un-1
0
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
21-M
ay-1
2
17-N
ov-1
2
Date
Pric
e (c
ents
/bu.
)
March 12, 2004
September 14, 2005
September 14, 2005
March 14, 2008
March 14, 2007
Nearby CME Corn Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
100
200
300
400
500
600
700
80004
-Jan
-04
02-J
ul-0
4
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
08-D
ec-0
8
06-J
un-0
9
03-D
ec-0
9
01-J
un-1
0
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
21-M
ay-1
2
17-N
ov-1
2
Date
Pric
e (c
ents
/bu.
)
March 12, 2004
September 14, 2005
September 14, 2005
March 14, 2007
March 14, 2008
July 16, 2008
Nearby CME Corn Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
100
200
300
400
500
600
700
80004
-Jan
-04
02-J
ul-0
4
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
08-D
ec-0
8
06-J
un-0
9
03-D
ec-0
9
01-J
un-1
0
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
21-M
ay-1
2
17-N
ov-1
2
Date
Pric
e (c
ents
/bu.
)
Nearby CME Soybean Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
500
700
900
1100
1300
1500
17004-
Jan-
04
2-Ju
l-04
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
8-D
ec-0
8
6-Ju
n-09
3-D
ec-0
9
1-Ju
n-10
28-N
ov-1
0
27-M
ay-1
1
23-N
ov-1
1
Date
Pric
e (c
ents
/bu.
)
Nearby CME Wheat Futures Prices and Structure of Deferred Futures Prices on Last Day of Delivery, January 2004-
September 2008
200
400
600
800
1000
1200
14004-
Jan-
04
2-Ju
l-04
29-D
ec-0
4
27-J
un-0
5
24-D
ec-0
5
22-J
un-0
6
19-D
ec-0
6
17-J
un-0
7
14-D
ec-0
7
11-J
un-0
8
8-D
ec-0
8
6-Ju
n-09
3-D
ec-0
9
1-Ju
n-10
28-N
ov-1
0
Date
Pric
e (c
ents
/bu.
)
Structural Issues and Delivery Problems
• Limited commercial activity• Grading uncertainty• Thin market price bids• Market imbalances
Monthly Receipts and Shipments at Delivery Locations for CME Corn Futures, November 2001-September 2008
0
10
20
30
40
50
60N
ov-0
1M
ar-0
2Ju
l-02
Nov
-02
Mar
-03
Jul-0
3N
ov-0
3M
ar-0
4Ju
l-04
Nov
-04
Mar
-05
Jul-0
5N
ov-0
5M
ar-0
6Ju
l-06
Nov
-06
Mar
-07
Jul-0
7N
ov-0
7M
ar-0
8Ju
l-08
Calendar Month
Ship
men
ts (m
il. b
u.)
Peoria-PekinOttawa-ChillicotheLockport-SenecaChicago
Monthly Receipts and Shipments at Delivery Locations for CME Soybean Futures, November 2001-September 2008
0
10
20
30
40
50
60N
ov-0
1M
ar-0
2Ju
l-02
Nov
-02
Mar
-03
Jul-0
3N
ov-0
3M
ar-0
4Ju
l-04
Nov
-04
Mar
-05
Jul-0
5N
ov-0
5M
ar-0
6Ju
l-06
Nov
-06
Mar
-07
Jul-0
7N
ov-0
7M
ar-0
8Ju
l-08
Calendar Month
Ship
men
ts (m
i. bu
.)
St Louis River AreaHavana-GraftonPeoria-PekinOttawa-ChillicotheLockport-SenecaChicago
Monthly Receipts and Shipments at Delivery Locations for CME Wheat Futures, November 2001-September 2008
0
10
20
30
40
50
60N
ov-0
1M
ar-0
2Ju
l-02
Nov
-02
Mar
-03
Jul-0
3N
ov-0
3M
ar-0
4Ju
l-04
Nov
-04
Mar
-05
Jul-0
5N
ov-0
5M
ar-0
6Ju
l-06
Nov
-06
Mar
-07
Jul-0
7N
ov-0
7M
ar-0
8Ju
l-08
Calendar Month
Ship
men
ts (m
il. b
u.) Toledo
St LouisChicago
Solutions
1. Address the carry--increase contract storage rates
2. Address the disconnect between delivery and load out
-- forced load out/demand certificates -- cash settle
3. Address structural issues-- additional delivery locations
Important Issues
• Who benefits/loses from changes?• How is long/short market balance
altered from proposed changes?• Unintended consequences of forced
convergence?• Must address asymmetry—inability to
force convergence from the short side