Prices for wheat untied from the buyer – Economics – Kommersant
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“Kommersant” understood in detail the construction of a new grain futures on the Moscow Exchange – despite the skepticism of experts towards the purchase price index of the state exporter OZK-Trading, on which the non-deliverable futures contract is based, this instrument can work. Although the stock index of wheat is determined based on the results of commodity auctions of the National Commodity Exchange (NTB), the monopoly customer of which is the state exporter OZK-Trading, the company does not influence pricing, but only indicates the volume of demand. The index takes into account the competitive prices at which the market satisfies this demand.
On August 31, the Moscow Exchange launched trading in a settled futures contract for the Russian wheat exchange index, which is determined at NTB auctions. According to the Moscow Exchange, on the second day after the launch, the trading volume amounted to 6.1 million rubles, almost double the figure of the first day (3.5 million rubles). Experts have previously expressed doubt that the launched tools will work, since the only specified customer of the auctions is the state company OZK-Trading (see Kommersant dated September 1). However, as Nikita Zakharov, general director of the National Commodity Exchange, explained to Kommersant, the OZK determines only the volume of auction purchases in tons, based on seasonal fluctuations (in July-August the volume is much larger than in May-June) and the ability of exporters to ship wheat to terminals . The starting price is determined as the lowest price of the previous trading day, but if the players are not ready to sell wheat at this price or there is no volume, the NTB system automatically raises the price. When an offer arises, sellers compete on price down. The system ranks bids by price and automatically selects the cheapest in the volume of the auction, and of equal prices, priority is given to those submitted earlier. The NTB noted that a second customer, Demetra-Holding, is present at the auctions (on behalf of OZK-Trading, the total volume is purchased for both customers with subsequent distribution between them under an agency agreement). There are currently 235 registered sellers on the exchange. The NTB emphasizes that the wheat index has become the base for the launch of the futures, since it has a sufficient amount of wheat and it was formed as a result of competition, and not set manually. Note that in July 2022, the Bank of Russia approved this approach to the formation of a price indicator.
The launch of a non-deliverable futures contract for wheat was due to the fact that the Russian Federation is the largest exporter of grain, and importers need up-to-date price information, and after the departure of world price agencies from the Russian Federation, the financial and agricultural sectors lost price indicators for agricultural products, says Vladimir Yarovoy, Managing Director for Derivatives of the Moscow Exchange . The contract can be used by sellers to hedge the risks of lower prices, and by consumers, exporters and foreign buyers – to insure against their growth, while the absence of obligations for the physical delivery of grain makes it an attractive financial instrument for market participants, the Moscow Exchange notes.
According to OZK JSC, since the beginning of trading in August 2021, more than 1.1 million tons of grain have been purchased at NTB auctions. The formation of a transparent and independent domestic price indicator for wheat on the terms of CPT Novorossiysk, according to the company, will allow abandoning the use of foreign indices. In the coming months, the state exporter plans to expand the pool of grain buyers at NTB auctions by providing the opportunity for several buyers to participate in one auction directly, and not through an agency scheme.
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