* Euronext considers adopting same criteria as delivery
* Exchange wants decision before Sept. 2017 futures open
* Market grapples with quality issues
(Adds detail, background)
By Valerie Parent and Gus Trompiz
PARIS, Sept 4 The Euronext exchange
said it aimed to decide in the next two months whether to add
new quality terms to its milling wheat futures contract
<0#BL2:>, in line with rules set by silos to ensure delivery of
suitable wheat out of a poor French crop.
Euronext's wheat contract, a price benchmark in Europe, is
defined as a milling wheat grade suitable for making bread. But
traders see its current quality specifications as basic.
The prospect that much of the new French crop will be of
lower, animal-feed quality due to heavy rain has intensified
debate over what standard Euronext represents.
The exchange said last month it would discuss adopting the
same wheat quality terms as the silos to bring greater clarity
to the market.
It wants to decide on any changes before the September 2017
futures open for trading on Nov. 11, following the expiry of the
November 2014 position, an official said.
"We hope the question will be settled before the expiry of
the November futures," Olivier Raevel, head of commodities at
Euronext, told Reuters by telephone. "We would prefer not to
have to suspend the opening of September 2017 futures."
Euronext is not able to change contract terms for futures
that are already trading, which currently includes positions for
delivery up to May 2017, in line with its policy of offering a
three-year trading horizon.
Last month, Senalia and Socomac, the operators of the silos
that can take delivery of 2014 crop traded on Euronext, set
requirements for Hagberg falling numbers and protein content,
two wheat quality measures that are not included in Euronext's
The silos' move was welcomed by some operators who were
worried that the milling wheat status of the Euronext contract
was at risk, but was criticised by others as creating confusion
by adding terms not in the actual futures contract.
Some traders say a sharp fall in open interest in Euronext
wheat futures in the past month reflects uncertainty over the
market's quality specifications.
Raevel said August was typically a slower month because of
operators taking summer holidays and stressed that volumes of
milling wheat futures traded last month were up 7 percent versus
the year-earlier period.
CONSULTING INTERNATIONAL USERS
However, confusion over how the delivery silos' policy
related to the Euronext contract led the exchange to issue a
technical market notice this week saying that its quality
mechanisms had not changed.
The statement followed queries from participants about
whether further price reductions could be granted for wheat not
meeting the silos' Hagberg and protein standards, Raevel said.
Euronext is not ruling out any proposals at this stage on
how to modify the contract, he said, adding it was cautious
about suggestions that the exchange launch a separate
high-quality wheat contract, as this might dilute market
Worries that more stringent specifications would hurt
liquidity led operators to reject a proposal by Euronext last
year to add a Hagberg requirement to its wheat contract.
But concern among exporters and millers about this year's
poor crop in France, as well as a longer-term decline in protein
content, could generate more support this time.
France is expected to struggle to sell milling wheat to
traditional overseas clients this season and traders have
already turned to other European origins to meet domestic and
Euronext said previously it would hold a meeting of experts
in September to discuss adopting Hagberg and protein standards,
but it is now planning an email survey in order to consult a
wide international base of market users, Raevel added.
(Reporting by Valerie Parent and Gus Trompiz; editing by Jane
Baird and Keiron Henderson)