Release: #4143-98
For Release: May 7, 1998

CFTC Approves Chicago Board of Trade Proposals for

Corn and Soybean Futures Contracts

Washington, D.C.-- The Commodity Futures Trading Commission (Commission) today approved the application of the Chicago Board of Trade (CBT) for contract market designation in corn and soybean futures contracts. On November 7, 1997, the Commission had issued an Order under section 5a(a)(10) of the Commodity Exchange Act (Act) to change and to supplement the delivery specifications of the CBT corn and soybean futures contracts. By letter dated November 17, 1997, the CBT notified the Commission that it would submit for Commission review an alternative to the contract terms ordered by the Commission. On December 19, 1997, the CBT submitted for Commission consideration its proposal, which it supplemented on March 20, 1998, for new contract terms for corn and soybean futures beginning with contract months in the year 2000.

The CBT specifically proposed changes to the contract terms: (i) to add the southern Illinois River as delivery locations for soybeans and to delete the Toledo, Ohio switching district as a delivery location for soybeans; (ii) to modify the premiums for delivery of soybeans and corn at non-par locations based upon a fixed cents-per-bushel schedule; (iii) to conform the differentials under a contingency plan to the premium schedule; and (iv) to add a $5 million minimum net worth eligibility requirement for issuers of shipping certificates.

The Commission approved the CBT's proposal based upon the Commission's analysis that the proposal meets the legally required level of deliverable supplies for the contracts and otherwise meets the requirements of the Act. The Commission's approval of the delivery locations selected by the CBT for its revised corn and soybean futures contracts is not based upon a finding that Toledo, Ohio, is in any way an inappropriate delivery point for these contracts. To the contrary, the Commission found previously that Toledo has proven to be an effective futures delivery point for corn and soybeans and is an important delivery point on the CBT wheat contract.

The Commission's Order approves under section 5a(a)(12) of the Act the contracts' proposed terms and conditions. The Commission's approval of the CBT proposal is based on its findings that available deliverable supplies of corn and soybeans under the CBT's proposal are not so inadequate under section 5a(a)(10) as to require that the Commission mandate additional delivery points. The Commission also found that the revised CBT proposed locational price differentials for the corn and soybean futures contracts proposed by the CBT fall within the range of commonly observed or expected commercial price differences, as required by section 5a(a)(10) of the Act and Commission policy. However, the Commission directed the CBT to report annually for five years on the experience with deliveries and expiration performance in the revised corn and soybean futures contracts and on the extent to which particular locational price differentials may discourage or encourage deliveries to be made from each delivery location.