MGEX INDEX CONTRACTS - SUPER

AGRICULTURAL AGRICULTURAL 

ADVISORY COMMITTEE ADVISORY COMMITTEE

CFTC 

July 29, 2008
MGEX INDEX CONTRACTS - SUPER

M

A

Y 2

0

0

8 M

GEX H

ARD RED S

PRI

N

G W

HEAT (

H

B

a

sis Lev

els for Minneapolis

-5

0

0

50

100150200250

4/1/2008

4/4/2008

4/7/2008

4/10/2008

4/13/2008

4/16/2008

4/19/2008

4/22/2008

4/25/2008

4/28/2008

5/1

cents/bushel

14% M

pls. R

ail

Early and Stable Convergencein May MG

E

X H

R

S

W

F4
MGEX INDEX CONTRACTS - SUPER

J

U

L

Y 2

0

0

8 M

G

E

X H

ARD RED S

PRI

N

G W

H

E

A

T (

H

B

a

sis Le

v

els f

or Minneapolis

-4

0

0

4080

120160

6/1/2008

6/4/2008

6/7/2008

6/10/2008

6/13/2008

6/16/2008

6/19/2008

6/22/2008

6/25/2008

6/28/2008

7/1/2008

7/4/20

cents/bushel

14% M

pls. Rail

Move to ConvergPrior to First Delivin July M

GEX HR

FND6/3

0

FDD7/1

x

x
MGEX INDEX CONTRACTS - SUPER

MGEX INDEX PRODUCTS MGEX INDEX PRODUCTS

- Superior Hedge Performance Superior Hedge Performance 

–

An Alternative to the Existing An Alternative to the Existing 

Traditional C Traditional Contracts ontracts

•

The grain industry is suffering from a lack of convergence for t

• In today’s environment, weak basis, even collapsing basis lev

upon past basis relationships meaningless.

•

The traditional basis hedge reduced risk in the past but may a
MGEX INDEX CONTRACTS - SUPER

-200-100

0

Cr

o

p Y

e

ar 2

004/05 2005/06 

2

006/07 

Jul.04 Jul.05 Jul.06 Jul.0

N

atio

nal A

vera

g

e Cash Price

MGEX Future

s Pric

e

Collapsing Basis

Existing Futures Price Represented as a Con

MGEX SRW INDEX FUTURES - EXISTING WHEAT 

Q: Which is the Better Hed

Q: Which is the Better Hed

Q: Which is the Better Hed

National Average Cash Price and MGEX Futures P

ARE THE SAME,

guaranteeing near perfect CONVER

G

E

N

C

E for the shor
MGEX INDEX CONTRACTS - SUPER

-115

-6

5

-1

5

No

v.0

4

N

o

v.0

5 Nov.0

6 

Crop Year 2004/0

5 2

0

0

5/0

6 20

0

6/07 

0

MGEX NATIONAL SOYBEAN INDEX (NSI) FUTURES – EXISTIN

Q: Which is the Better He

Q: Which is the Better He

Q: Which is the Better He

The same challenge of the hedging mechanism that occurred in W

to develop in Soybeans.

Collapsing Basis

and Weakening of the Current 

Hedging 

Mechanism

Existing Futures Price Represented as a C
MGEX INDEX CONTRACTS - SUPER

-6

0

-4

0

-2

0

0

D

e

c.04

D

ec.

0

5

D

ec.06

D

Cro

p Year 2004/05 20

0

5/06 

2

0

0

6/0

7 

-6

0

-4

0

-2

0

0

D

e

c.04

D

ec.

0

5

D

ec.06

D

Cro

p Year 2004/05 20

0

5/06 

2

0

0

6/0

7 

Less reliable, more volatile basis relatio

Existing Futures Price Represented as a Cons

MGEX NATIONAL CORN INDEX (NCI) FUTURES –

EXISTING CO

The same challenge of the hedging mechanism that occurred in W

in Soybeans may be developing in Corn.

Q: Which is the Better Hed

Q: Which is the Better He

Q: Which is the Better He

Less reliable, more volatile basis relatio

Existing Futures Price Represented as a Cons
MGEX INDEX CONTRACTS - SUPER

1. Settle FINANCIALLY into the DTN National Average 2. NO PHYSICAL DELIVERY 3. Financial settlement allows ALL PARTIES to participa

without negative consequences to others:

Short hedgers

Long hedgers

Speculators

Index/fin

ancial investors and hedger

FINANCIAL SETTLEMENT OF GRAIN FUTURES C

IS THE NEW M

ODEL THAT ACCOMODAT

ALL PLAYERS IN THE MARKETPLACE