UPDATE 2-Euronext plans Ukraine wheat futures to tap Black Sea market

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PARIS, Jan 28 (Reuters) - Euronext is developing cash-settled futures for Ukrainian wheat to cater for the growing Black Sea grain export market, the European market operator said on Thursday.

It is working with commodity pricing agency Argus Media to develop the product, which will offer futures and options, Nicholas Kennedy, head of commodities at Euronext, told the Paris Grain Day conference.

Euronext has been preparing to launch cash-settled contracts, starting with durum and feed barley this year, as a way to expand its commodity business currently based on futures offering physical delivery, notably its French-based wheat futures.

"We're working with Argus Media on a Ukrainian Black Sea wheat reference," Kennedy said.

"For us it's clear that, alongside our historic proxy for European wheat...we've got to capture the Ukrainian and Black Sea element."

Euronext, whose existing wheat futures are a widely used benchmark for the European market, has in recent years considered developing Black Sea grain derivatives.

Rival market operator CME Group has already developed cash-settled futures for Russian wheat, which is the main export origin for the grain in the Black Sea zone.

There is market demand for a product covering 11.5% protein Ukrainian wheat, as opposed to the 12.5% protein wheat that is the main indicator for the Russian market, Fiona Poynter, agricultural lead - business development at Argus, told the conference.

Argus has built on the Ukrainian presence of consultancy Agritel, which it acquired last year, to track physical prices of Ukrainian wheat, she said.

The planned contract would be based on screen trading via Euronext's commodity trading platform, rather than processing of off-screen block trades, Kennedy added.

CME's cash-settled futures for Russian wheat and also Ukrainian corn allow both screen trading and clearing of privately negotiated block trades.

Further details of the planned contract could not be disclosed yet, Euronext and Argus said. (Reporting by Gus Trompiz Editing by David Goodman, Kirsten Donovan)

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