CHICAGO (Commodity Online): Commodity Futures Trading Commission is planning to recommend regulators to Chicago Board of Trade wheat futures in order to improve the convergence of spot and futures prices of wheat.

A subcommittee of CFTC will recommend a variable storage rate be implemented for CBOT wheat futures starting with the December 2009 contact in the wake of failure in improving convergence between cash prices and futures, Dow Jones reported on Thursday.

CFTC said that the previous changes to the CBOT wheat had failed to improve the disparity in prices between the spot and futures. The markets are supposed to come together when futures contracts go into delivery to facilitate hedging, but cash prices have languished well below futures for at least two years, it said.



In order to fix this problem CFTC will introduce regulators consider a variable storage rate that could change from contract month to contract month depending on spreads between the nearby contract and the first deferred contract month.

Industry members said it was important to implement it as soon as possible in an attempt to fix the CBOT wheat contract. The National Grain and Feed Association, which represents companies that handle more than 70% of U.S. grains and oilseeds used in domestic and export markets, reiterated on the call that it supported implementation with the December contract.

However, there could be legal problems for the exchange if it changes the specifications on the actively traded, nearby December month, said Dave Lehman, director of commodity research and product development for CME.

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