CME appoints lead market-maker for fertiliser futures

The Chicago Mercantile Exchange (CME) has named Agriliance as the lead market-maker for the exchange’s new fertiliser contracts traded on Globex, the exchange’s electronic trading platform.

The CME developed the contracts earlier this year with the hope that the futures, and options on futures, will prove popular as a means of protecting the fertiliser industry from fluctuations in the price of natural gas – a vital ingredient in most nitrogen fertilisers.

“Participation from Agriliance as a lead market-maker in our fertiliser contracts brings their unique set of agricultural experiences to this highly sophisticated market,” said John Harangody, director of agricultural commodities for the CME. “Their commitment to providing liquidity means the CME will offer our customers additional flexibility, transparency and execution.”

Minnesota-based Agriliance markets crop nutrients, crop protection products, seed and related technical services to farmers and ranchers through local co-operatives and independent retailers across the US, Canada and Mexico.

The three products - diammonium phosphate, urea and urea ammonium nitrate – together have combined annual sales of $4 billion to $6 billion in the US, the CME said.

The contracts, launched on June 6, 2004, are sized at 100 tons each, and are listed with expirations in March, May, July, September and December. The minimum price movement is $0.50 per ton. The contracts call for physical delivery from the seller’s choice of origin to the buyer’s destination, using rail-based transportation paid for by the buyer, which replicates the practice of the underlying cash markets.

The success of the contracts rests with the CME’s ability to convince clients of the need and worth of the contracts, said Mace Thornton, director of the Washington DC-based American Farm Bureau Federation (AFBF). “The CME contracts will help to a degree,” Thornton says, “but the CME has to adopt the correct outreach programme to make certain that both the producers and consumers are aware of the product.”