Posted by: usset001 | October 19, 2009

What’s going on with the Soft Wheat Index contract at the MGEX?

swri open interestSeveral years ago (2002?), the Minneapolis Grain Exchange introduced a number of new futures contracts based on cash grain indexes for hard red winter wheat, soft red winter wheat, corn and soybeans. These contracts have not generated much interest until this month.

As recently as September 25, there were no open contracts in the SRWI (soft red wheat index) contract. The first open contracts appeared on September 28 and, over the past 15 trading days, open interest increased every day. It jumped over 300 contracts on Friday, and open interest now stands at 1,200 contracts.

Why futures contracts succeed or fail is a rich topic, and I would be hard pressed to explain the recent interest in the SWRI contract at the MGEX. I suspect it may have something to do with the CME/CBOT soft wheat contract, which has become the poster child for cash/futures convergence problems in “traditional” futures contracts.

The Minneapolis contract has a long ways to go before it overtakes the Chicago contract (330,000 contracts open) to become the main pricing vehicle for soft wheat, but this is a very interesting situation that I intend to watch closely in the months ahead.

You can learn more about the MGEX index contracts here.


  1. The index contracts do have a lot of merit for many good reasons. It’s too bad MGEX pulled the rug out from traders the fiirst time they were launched. The NCI (corn index) had gained particular interest because of the way the contract is settled and because it’s a better reflection of country prices. But then they decided to switch electronic trading platforms and shut down the contract for a short time. It never recovered from that.

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