Euronext, a pan-European stock and derivatives exchange, yesterday celebrated the planned launch of its new dairy derivatives complex by "sounding the gong" in Amsterdam.
Three dairy commodity futures - unsalted lactic butter, skimmed milk powder (SMP), and sweet whey powder - will be launched by Euronext on April 13.
Euronext is offering a full trading fee waiver until June 30 "to facilitate trading of these instruments."
"...these new instruments will be available for trading following the end of the European milk quotas and liberalisation of milk production," Euronext said in a notice.
"Manage their risk"
The EU milk quota system, introduced as a temporary measure in 1984 to address the over production of milk, expired yesterday on the final day of the 2014/15 season.
Under the quota system, EU Member States were issued with two national quotas - one for milk deliveries to processors and the other for direct sales at farm level. Member States that exceeded either quota handed a fine called a superlevy of €27.83 per 100kg.
Milk production in the EU is expected to increase just 1% in 2015, but significantly in coming years.
The dairy futures scheduled to be launched later this month will allow "the European dairy community to hedge its exposure to price fluctuations in this volatile market just as the milk quotas expire in the European market," Euronext said.
"Within this context this new product complex will allow the industry to manage their risk more smoothly in a transparent, regulated and liquid market," it said.
Options contracts
In November 2014, Euronext first announced plans for a full suite of dairy futures and options that would be listed in Amsterdam in the wake of the dismantling of the EU milk quota system.
Options differ from futures in that the holder of an options contract has the right, but not the obligation, to buy or sell a commodity at a predetermined price.
Euronext is yet to set a launch date for its planned dairy commodity options.