Grains Daily Price Limits Raised By CME Group

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The CME Group announced after a routine biannual review, it has decided to expand daily price limits for Chicago Board of Trade grain and soy futures. The new limits will take effect May 2 for trades dated May 3.

Here are some of the new limits. (It also widened limits for oats, rough rice, lumber futures and other grain futures contracts.)

• Corn: 40¢ per bu. (currently at 25¢ per bu.)
• Soybeans: $1 per bu. (70¢ per bu.)
• Soymeal: $30 per short ton ($25 per short ton)
• Soy oil: 3.5¢ per lb. (2.5¢s per lb.)
• SRW and HRW wheat futures: 45¢ per bu. (40¢ per bu.)

Price limits represent the maximum price range permitted for a futures contract in each trading session, according to CME. Price limits vary from product to product, as does what happens when a price limit is hit. Grain futures, for example, have daily hard limits.

“Some of these limits are expanded by 50%,” says Jerry Gulke, president of the Gulke Group. “That’s huge volatility.”

For example, he says, limit up and limit down in corn will now be 80¢. On 200 bu.-per-acre corn that’s $160 an acre. On 10,000 acres, gross income could move around $1.5 million in one day.

“Watching markets on a weekly basis should make for interesting times ahead and give volatility a whole new meaning especially with new limits widened appreciably,” Gulke says. “There’s an old saying the markets will shake the loose leaves off the trees, but none of us have ever seen volatility like this.”

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