The EEX, an exchange platform for energy and commodity products headquartered in Leipzig, Germany, registered the highest daily volume ever traded on a futures market for dairy products in Europe on October 23.
A total of 324 contracts were traded, corresponding to a volume of 1,620 tons. These were made up of 108 Butter Futures contracts, amounting to 540 tons, and 216 Skimmed Milk Powder Futures, amounting to 1,080 tons.
Sufficient liquidity
Charlie Hyland, commodity risk manager at INTL FC Stone, explained the reasons: "The record trade volumes were a result of a Synthetic Milk Hedge, where hedging an index of Butter and SMP was used to hedge the fluctuations in the price of milk.
“The volume highlights the fact there is sufficient liquidity available on the EEX to enable market participants to hedge a significant amount of physical price risk.”
The platform reported that 3,128 contracts were traded in agricultural products at EEX in October. This included 623 contracts (equal to 3,115 tonnes) from Skimmed Milk Powder, which is the highest ever monthly volume that has been traded on a Derivatives Market in Europe thus far, more than doubling the previous record volume of 304 contracts that was registered on Eurex Exchange in November 2014.
Reducing risks
EEX believes agricultural futures offer all participants active in the dairy business the possibility to effectively reduce the risks of price volatility.
“Price volatility in national and international markets for dairy products has started to pose significant challenges to the European agricultural and food production sector alike. On-exchange risk management instruments such as the EEX Futures on Butter, Skimmed Milk Powder and Whey Powder play an increasingly important role to manage price risks,” said Sascha Siegel, head of agricultural commodities at EEX.
On 11 May 2015, EEX started to trade agricultural futures on butter, piglets, potatoes, skimmed milk powder, whey powder and hogs. Eileen Hieke from corporate communications at EEX said: “This transfer of agricultural products is another step to position EEX as the commodity exchange within Deutsche Börse Group.
“Furthermore, we continue our diversification course which means offering products for a wide commodity portfolio including agricultural products.
“The integration of the agricultural products onto our platform gives the participants in this market the opportunity to trade and clear a wide range of commodities on one common platform.”