CME Group to Launch Rainfall Contracts in Nine U.S. Cities
CHICAGO, Oct. 14 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, announced today that it will begin listing and trading rainfall futures, options on futures and binary options beginning October 31 for trade date November 1. The monthly and seasonal contracts will be based on the CME Rainfall Index and will be available March through October. These contracts will be listed with, and subject to, the rules and regulations of CME.
"We see the impact of weather every day in our lives and we know how it can influence regional and local business decisions – whether to raise prices, divert inventory or result in temporarily closures," said Tim Andriesen, CME Group's Managing Director of Agricultural Commodities and Alternative Investments. "A significant number of industries, from agribusiness to recreation, are reliant on good weather, but also are at the mercy of bad weather. Rainfall contracts, in conjunction with our existing suite of weather products, will allow these businesses to manage the resulting risk."
"CME Group's commitment to expand their product offerings in the weather space has enabled our clients to gain access to financial risk mitigation tools previously only available to large, commercial end-users in the over-the-counter market," said Jeff Hodgson, President of Chicago Weather Brokerage. "The rainfall contracts are a viable hedging tool for large agricultural market participants, as well as smaller industries that are equally affected by weather."
The rainfall contract locations include Chicago O'Hare International Airport, Dallas-Fort Worth International Airport, Des Moines International Airport, Detroit Metro Airport, Jacksonville International Airport, Los Angeles Downtown USC Campus, New York LaGuardia Airport, Portland International Airport and Raleigh/Durham International Airport.
The futures and options on futures contracts enable market participants to manage exposure to rainfall. The binary options enable users to manage the ramifications on businesses or other operations if rainfall is more or less than anticipated. Binary options provide the options holder with a fixed dollar payout upon exercise. If the option expires without being exercised, the holder's losses are limited to the amount paid for the binary option.
CME Group's weather product suite offers trading opportunities related to rainfall, temperature, snowfall, frost and hurricanes. The products are based on a range of weather conditions in more than 47 cities in the United States, Europe, Canada, Australia and Asia, with the hurricane products geared to nine U.S. regions. For more information about CME Group weather products, visit http://www.cmegroup.com/weather.
As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the largest central counterparty clearing services in the world, which provides clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort®. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk in both listed and over-the-counter derivatives markets.
The Globe logo, CME, Chicago Mercantile Exchange, CME Group, Globex, E-mini and CME ClearPort are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago. NYMEX and New York Mercantile Exchange are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (Nasdaq: CME) and its products can be found at www.cmegroup.com.
FDIC chair warns of possible US farmland 'bubble'
Mon, Oct 18 2010
* Says U.S. farmland values requires "close monitoring."
* Farmland values 58 percent above 2000 levels
By Carey Gillam
KANSAS CITY, Mo., Oct 18 (Reuters) - U.S. farmland could be the next asset bubble at risk for bursting, a leading banking regulator said on Monday.
Sheila Bair, chairman of the Federal Deposit Insurance Corp., said it was important to monitor U.S. farmland values for signs of instability like the price bubbles in the housing and stock markets that burst with disastrous consequences for many investors.
Farmland values remain 58 percent above their 2000 levels in inflation-adjusted terms. Investors have been snapping up high-quality land in the Midwest where row crops like corn and soybeans are grown as well as orchards for high-priced nuts and berries along the U.S. West Coast.
While commercial and residential real estate prices have fallen sharply, farmland valuations have remained strong during the recession. But Bair said those "positive fundamentals" could change.
"A sharp decline in farmland prices similar to the early 1980s could have a severe adverse impact on the nation's 1,579 farm banks," Bair said in a speech delivered to a risk management group in Baltimore.
"While the credit structure underlying U.S. farmland does not appear to involve excessive leverage or inappropriate loan products, this is a situation that will continue to require close monitoring," she said.
Bair is a member of the newly established Financial Stability Oversight Council made up of the Treasury, the Federal Reserve, the FDIC and other financial regulatory authorities. FSOC held its first meeting on Oct. 1.
In New Zealand, milk producers are returning to regular operations following adjustments that some farmers made to their operations following the heavy
snowfall on the South Island and wet conditions in most all other regions in recent weeks. These adverse weather conditions, at this time of the season, were stressful to the milking herd and breeding timelines. Some farmers adjusted their milk schedules to once a day to help maintain cow conditioning at this crucial time of the breeding season. Overall milk production is now back on track to steadily build toward season peak levels. Milk handlers are
speculating that this glitch, during the seasonal buildup, may take the bloom out of a higher seasonal peak than projected. Prior to the adverse conditions, milk production was running 1 - 2% ahead of last year, slowed during the inclement weather patterns, but is now once again on the uptick. This weather glitch has negatively impacted some production projections by as much as 2%.
An auction is set for November 17 to sell off 7500 milking cows from the Artesia Dairy southeast of Corcoran. The auction at Overland Stockyards in Hanford also includes rolling stock from the dairy owned by Hans Reitsma - a Dutch immigrant who died at his own hand in late 2008.
Reitsma’s death caused a stir in the close knit central California dairy industry in part because Hans left behind a widow and seven young children.
Family-owned dairy farmers- many with Dutch or Portuguese heritage - shared their neighbor’s pain also because the disastrous and sudden downturn in milk prices called into question all of their survival.
The collapse in dairy prices in 2008 came just as a global financial crisis affected banks.
Like Reitsma most dairymen had borrowed millions to finance their operations and word spread that Reitsma had been pressured by his bank to sell the operation he had built up so successfully over the years. He reportedly left behind two suicide notes - one for his family and another for his banker say several news accounts.
Reitsma’s widow Roxanne -raised from a large Portuguese immigrant family- bravely tried to run the 2330 acre farm on Highway 43 at Rd 136 by herself for months. But then this sad saga got sadder.
A Tulare County court this spring authorized the dairy be placed in receivership after the lender claimed the operation continued to lose value.
The receiver - a kind of court-appointed trustee has been operating the 7500 head dairy since then says Gary Honeycutt who manages the dairy for the receiver JVan Curen.
WARN Notice
In recent weeks the receiver has posted a state WARN notice that the 70 workers at the big Tulare County ranch will be laid off as of November 28. A WARN notice requires employers to give affected employees and other state and local representatives notice 60 days in advance of a plant closing or mass layoff. It triggers help for the affected employees.
The action to sell off the cows is needed to protect the asset says Honeycutt. “The collateral here at the Artesia Dairy has been deteriorating” figures Honeycutt . The sale will not affect a future sale of the property and homestead itself. Honeycutt says the property sale is being handled by area realtors Schuil & Associates but that no sale on the property is pending.
Roxanne and the children no longer live on the ranch having moved this summer.
Today,Roxanne focuses on her children and asks not to be quoted directly in any article. But if you ask her she would tell you she does not agree anyone has the right to sell off their cows and rolling stock.
In the past year Roxanne has been quoted helping bring her husband’s story to light in several national and international news stories highlighting Hans immigration to the US in 1988 in pursuit of the American dream.
According to one Dutch news report his dream was to build a dairy of his own with 700 cows - an unheard of herd size in his native Netherlands.
Twenty years later in 2008 the 37 year-old dairyman had built up two modern dairies in California with 18,000 cows and some 86 employees.
But Tulare County’s multi-decade dairy expansion came to a screeching halt in 2008 with the worldwide recession affecting commodities, banks and real estate.
It came home to roost on the young dairyman’s shoulders.
When he died Hans left behind kids ranging from the age of 2 to 14
The story impressed US Ag Secretary Tom Vilsack who met with Roxanne in March and later in August of last year in a meeting with dairymen set up by Jim Costa, the local congressman. According to one account Vilsack called Roxanne to the front of the room where the meeting was held at the Souza Dairy “and explained how meeting with her and her children touched him.He explained that he recalled a painful memory of a friend lost to suicide.” The account is from central California dairy farmer Barbara Martin who pens A Dairy Goddess’s Blog.
The story also made the news in several national news accounts of rural suicide in the midst of the financial crisis down on the farm.
In at least one news story Roxanne was quoted as blaming the bank for changing the terms of a loan.
$50 Billion Lost
The financial crisis continues says Kings County dairy activist Joaquin Contente.
”In the past few years our dairy industry lost $50 billion in income and equity. Add it up and it’s bigger than the Gulf Coast oil spill.”
Contente says simply figuring what a milk cow sells for today at about $1200 per cow vs $2000 a cow before all this - adds up to $9 billion lost in cows alone.
“Today about 20% of local dairy producers are out of equity” and could face foreclosure from their bank too if there is another downturn in prices he contends.
On the more hopeful side milk prices are much better today than they were in 2008 and Contente says that at least “most of us us can pay our day to day bills.”
There is however the worry that feed prices so important to the industry are suddenly spiking again in late 2010 to $5.80 per bushel. Fed by speculators there was a spike in corn prices to $7.50 a bushel in mid 2008 preceding the collapse of milk prices down to$10 per cwt in late 2008 from $17 per cwt just few months before.
Just before Christmas of that year Hans Reitsma committed suicide .
How Many Reporters Would Work for the Washington Post for $10.25 an Hour?
Sunday, 10 October 2010 07:33
AddThis
According to the Washington Post, if the answer is not many, then we need to bring in immigrant reporters. That is exactly the logic it used in a discussion of the fact that most native born American citizens are unwilling to do farmwork for this wage.
Economists would ordinarily say that the lack of a labor supply at a given price suggests that the wage is too low. However, the Post only considers this fundamental economic principle in passing. It is likely that if farmworkers received $60,000 a year, with health care benefits, there would be no shortage of U.S. citizens willing to do this work.
Of course this would raise the price of farm products, but it would be much cheaper to advertise in the Washington Post if its reporters worked for $10.25 an hour. The lower cost of advertising would be passed on in lower prices for groceries, cars and other items advertised in the paper. At least this is what people who believe in economics would say.
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High Level Group makes 7 recommendations for EU dairy sector
The High Level Group on Milk, set up last October in the wake of last year's dairy crisis, has finalised the report on its deliberations, including recommendations to the Commission on seven issues. These include an invitation to come forward with concrete moves to enhance the use of written contracts in the dairy supply chain and to consider proposals to increase the collective bargaining power of dairy producers.
EU Commissioner for Agriculture and Rural Development Dacian Cioloş stated today: "I welcome the work of the HLG and this report. I will now study it in detail with a view to coming forward with legislative proposals before the end of the year. My main aim is that we consider medium to long term measures which address the lessons learned from last year's crisis aimed at better structuring the sector as a whole."
The recommendations to the Commission from the High Level Group relate to:
*Contractual relations between milk producers and milk processors: Enhancement of formal written contracts, made in advance, to cover deliveries of raw milk (inc. price, volume, timing & duration) – through guidelines or a legislative proposal, maybe made compulsory by the Member State.
*Collective bargaining power of producers: Possible proposal for provision to allow producer organisations constituted by dairy farmers to negotiate jointly their contract terms, including price, with a dairy. Whether permanent or temporary (but sufficiently long), the provision should be subject to review.
*The possible role of interbranch organisations in the dairy sector: Examination of whether any of the current provisions for interprofessional organisations in the fruit & vegetables sector could also be applicable in the dairy sector.
*Transparency in the dairy supply chain: Further elaboration of the European Food Price Monitoring Tool, and a look at the provision of more information (e.g. on volumes of dairy products) by EUROSTAT & national statistics offices.
*Market measures and futures: Consideration of "green box compatible" instruments to reduce income volatility, including possibly facilitating the use of futures markets, in particular via targeted training programmes.
*Marketing standards and origin labelling: Ongoing Commission work on labelling should consider the feasibility of different options for "place of farming" labelling for dairy products and should seek distinct labelling for imitation dairy products.
*Innovation and research: Improvement in communicating existing possibilities for innovation and research within the existing framework of Rural Development and research framework programmes. Stakeholders should define clear research priorities for the dairy sector in order to allow better coordination of national & Community research programmes.
The full 50-page report (with annexes) will be posted shortly at: http://ec.europa.eu/agriculture/markets/milk/index_en.htm
Background
Following the difficult market situation for milk last year, the Commissioner established a High Level Expert Group on Milk (HLG) last October with the purpose of discussing mid-term and long-term arrangements for the dairy sector given the expiry of dairy quotas on 1 April 2015 (see IP/09/1420). While respecting the outcome of the Health Check, the HLG was asked to consider regulatory issues which might contribute to stabilizing the market and producers' income and enhance transparency on the market. 10 meetings were held from October 2009 until June 2010. A draft report summarising the outcome of the discussions and with certain recommendations was tabled in May, and this was adopted unanimously today.
Comprising representatives from Member States and chaired by the Director-General for Agriculture & Rural Development Jean-Luc Demarty, the HLG heard oral and written contributions from major European stakeholder groups in the dairy supply chain on the issues. Furthermore, the HLG received valuable contributions from invited academic experts, 3rd country representatives, DG Competition, National Competition Authorities and DG AGRI regarding some specific issues. Finally a major dairy stakeholder Conference was held on 26 March 2010 allowing a larger number of actors in the chain to express their positions.
