What are grain futures?
ASX Grain Futures are standardised exchange-traded and centrally cleared forward contracts that specify a fixed quantity of grain for delivery at an established point in the future at an agreed price. ASX Grain Futures contracts specify size, possible delivery location (s) and other terms and conditions.
What are grain options?
An Option is a contract between two parties giving the buyer of the option the right, but not the obligation, either to buy (call options) or sell (put options) the underlying Grain Futures contract at a set price, on or before a predetermined date. Options are financial products that, for the buyer of the option, effectively provide a form of price protection. Options are available over all ASX Grain Futures contracts.
Types of ASX Grain Futures & Options
There are five different commodities listed and available to trade:
- WA Wheat (WK)
- NSW Wheat (VW)
- Eastern Australia Feed Barley (UB)
- Australian Sorghum (US)
- Eastern Australia Canola (VC)
Benefits of using ASX Grain Futures & Options?
There are a number of benefits that can be realised through ASX Grain Futures & Options, including:
- Price transparency: traded prices on ASX are public information and are available in realtime through market data vendors, this website (20 minute delay) or reported in the daily activity report
- Payment security: ASX Clearing Corporation manages the financial integrity of the market
- Reduced production risk: ASX Grain Options provide growers with the flexibility to hedge price risk without having a production obligation
- Better hedge correlation: ASX Grain Futures represent supply and demand fundamentals for Australian grain and oilseed. A robust delivery network encourages effective convergence with the physical market.
- Market anonymity: participate in the futures market and delivery process without the need to disclose counterparty identities
- Reduced foreign exchange risk: ASX Grain Futures contracts are priced in Australian dollars per tonne
- Geographic spread: the ASX contract offering enables traders to trade Australian grain and oilseed against derivatives pricing grain in North America, Europe or other important regions.
Who uses ASX Grain Futures & Options?
ASX Grain Futures and Options provides all industry participants with the ability to manage risk and discover price. Anyone with an interest in Australian grain could potentially have an interest in the market. This includes;
- Grain growers
- International and domestic grain traders
- International and domestic end-users
- WEA Accredited bulk wheat exporters
- Arbitrage traders
- Market makers
How can the market be applied?
There are a number of reasons why participation occurs in a futures and options market. The participant may be interested to:
- Hedge their particular market exposure or financing risk
- Market their commodity by making or taking physical delivery
- Speculate on the price direction or price correlation of a commodity/commodities
- Arbitrage markets and thereby effect convergence with the physical market
- Trade 'Geographical Spreads' such as Australia versus North American, European or other markets.
A real hedging alternative
With in excess of 34 million tonnes of Australian grain and oilseed (PDF 125KB) traded, ASX Grain Futures and Options offer a real hedging alternative.
Trading and placing orders (to buy or sell) in ASX Grain Futures & Options
Orders placed in the ASX Grain Futures & Options market are matched on a strict time-price priority. This means orders that are matched (executed) will be executed at the price level of the order placed first.
When trading ASX Grain Futures & Options, your order is entered directly via a Participant into the ASX central market order book - this order book is available for the market to see. All orders are executed on a strict price/time priority. This means that the first order with the best bid or offer price is always executed first. To start trading, please contact an ASX Grain Futures & Options broker.
Risks of trading ASX Grain Futures & Options
ASX Grain Futures and Options are not suitable for all traders and investors. Before trading ASX Grain Futures and Options you should carefully assess your experience, investment objectives, financial resources and all other relevant considerations and consult your licensed financial services adviser. In particular, you should understand the implications of leverage, additional margin calls and unlimited losses on your investments.