CME Group Inc. (CME) will launch a wheat futures contract for the Black Sea region, an increasingly important world grain supplier, to begin trading in June.

The new contract, subject to regulatory approval, comes as the region becomes an increasingly important global grain producer, particularly for wheat. The region has accounted for more than 20% of global wheat exports in recent years, the CME said.

"Now more than ever the world relies on the Black Sea region to produce wheat and other grains to meet our growing global demand for food," CME Managing Director Tim Andriesen said.

At times, abundant wheat supplies from the region have flooded the global market, weighing on U.S. wheat prices. But some traders have considered supplies from the region unreliable at times, due to export restrictions and variable crop quality.

That uncertainty will be one of the biggest challenges for CME in establishing the contract, traders and analysts said. Russia banned grain exports for nearly a year after a historic drought there in 2010 prompted domestic food security concerns. Earlier this year, a Ukrainian advisory firm said many traders had agreed to restrict exports in response to a government request as a cold snap prompted worries about crop damage there.

Such restrictions are unheard of in the U.S., the world's largest wheat exporter, but would loom over trade in the new Black Sea contract, traders said.

"It's a very, very unstable environment," said Tregg Cronin, an analyst with Country Hedging, a brokerage and subsidiary of farmer cooperative CHS Inc. (CHSCP).

Andriesen said the exchange is "reasonably comfortable" about export flow due in part to its belief that "governments there recognize it's probably not one of the best strategies going forward."

Potential problems with export restrictions would also be limited by the fact the contract will have delivery points on the Black Sea in Russia, the Ukraine and Romania.

"If one of those countries were to shut off exports, it wouldn't disable the contract," Andriesen said in a conference call.

CME and the Ukraine announced in May 2011 their intent to create a wheat futures contract within the next 6 to 12 months.

The contract will be listed on the Chicago Board of Trade and will be traded electronically. It will be dollar-denominated.

CME said the new contract would begin trading June 6. The first contract would be for July delivery.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com

(END) Dow Jones Newswires

April 18, 2012 10:59 ET (14:59 GMT)