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U.S. grain firms ask CME to expand wheat delivery capacity

Reuters

CHICAGO, July 31 (Reuters) - CME Group said four grain companies have asked to increase by 12.6 million bushels the amount of wheat allowable in storage for delivery against CME's benchmark futures contract.

The Andersons Inc, Sunrise Co-op and Heritage Co-op applied to increase their delivery capacity at northern Ohio delivery points by a total of 8.453 million bushels while Archer Daniels Midland Co requested an increase at its Ottawa Lakes, Michigan, facility of 4.181 million bushels, according to a statement on the CME's website on Thursday.

The requests would boost delivery capacity at the sites by 33 percent and equate to 2,527 warehouse receipts. Each receipt represents one 5,000-bushel futures contract for soft red winter wheat.

However, Cargill applied to decrease the amount of wheat allowed for delivery by 166,000 bushels at its Lima, Ohio, facility.

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The requests come as farmers wrap up the SRW wheat harvest in the Midwest and commercial grain firms brace for a likely record-large corn and soybean harvest. Storage space will be at a premium when those supplies test grain facilities this fall, traders say.

The futures price spread - the price difference between nearby wheat futures contracts - has widened this summer. The jump triggered an action by CME in July to raise the maximum storage fee by 3 cents to 8 cents per bushel per month for its wheat, the first such hike in three years.

Under the so-called variable storage rate (VSR) scheme, CME has set triggers based on 30-day formulas. Traders said CME looks set to raise maximum storage fees another 3 cents in September since the spread between September and December futures so far this month has averaged 80 percent or more of full "carry," which is the estimated cost to store wheat from one contract delivery to the next.

Traders estimate it will take at least 30 days for the exchange to review the requests, so any increase in delivery capacity would not be in place until the December futures cycle.

CME was not immediately available for comment.

(Reporting by Christine Stebbins and Julie Ingwersen; Editing by Tom Brown)