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CME Group revises 50¢ corn 'limit'

05/10/2011 @ 3:53pm

CHICAGO, Illinois (Agriculture.com)--The CME Group said Tuesday that it is abandoning the idea of moving daily corn futures contract price limit levels by 50 cents. Instead, the exchange is pushing for a 40 cent 'limit'. The revision follows letters of criticism, issued to the Commodity Futures Trading Commission, from numerous market participants. 

After requesting the 50 cent limit in April, the CME Group had been awaiting approval by the CFTC. The letters opposing the CME Group's request can be seen on the CFTC's website.

“In response to significant increases in prices and volatility in the market, we recently proposed daily price limit increases in Corn futures,” Tim Andriesen, Managing Director,Agricultural Commodities and Alternative Investments, CME Group, states in a press release. “It’s important that markets trade allowing for price transparency and risk transfer and that limit moves are infrequent so as not to prevent price discovery. 

Andriesen adds, "At the same time, we recognize wider limits have an impact on many of our commercial customers. After significant discussion with customers and representative trade groups, we’ve reduced the proposed increase to $0.40 per bushel, which is a level we believe balances those two concerns.”

The current price limit is $0.30 per bushel per day for corn futures and option contracts, expandable to $0.45 and then to $0.70 when at least two contracts close at limit bid or limit offer on the previous trading day. Under the new proposal, price limits would be $0.40 per bushel per day with a max of one increase to $0.60 per bushel.

In recent months, corn futures prices and volatility have increased significantly. In the first quarter of 2011 alone, 36 corn contract months settled at limit bid or limit offer, compared to 36 corn contract months settling at limit bid or limit offer in all of 2010, according to the CME Group press release.

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