* DDG contracts will be equivalent to 100 short tons
* Trading to start April 26
* Traders wary about volumes for new contract
(Adds analyst, trade reaction, details)
By Mark Weinraub
CHICAGO, Feb 16 CME Group Inc (CME.O) will
launch futures contracts for distillers' dried grains, a
byproduct of corn ethanol production that can be used to feed
animals, the exchange operator said on Tuesday.
Trading in the distillers' dried grain contracts will start
on April 26.
"This product will enable our feed customers to directly
manage price risk of feed inputs that they haven't been able to
before," Tim Andriesen, CME Group managing director for
commodities, said in a statement.
Traders were skeptical that the new contract would attract
significant volumes, pointing to the CME's ethanol futures
contract as an example of the difficulty of attracting interest
to a new market.
"I am always a little apprehensive about any new products
being launched, simply because so many of them have failed,"
said Frank Cholly, senior market strategist at brokerage
Lind-Waldock in Chicago. "If it gets off to a slow start, and
they usually do, then it is very difficult for it to become
A distillers' dried grains contracts could attract interest
from hedgers looking to use them in combination with corn and
ethanol futures to lock in margins.
"These contracts look good on paper, and they do serve a
purpose," said Shawn McCambridge, analyst at Prudential Bache
Commodities in Chicago. "It just depends on whether or not the
producer or the industry in general wants to participate."
Production of distillers' dried grains has been on the rise
during the past few months as falling corn prices improved the
profit margins at ethanol plants.
Global economic weakness also has boosted demand for
distillers' dried grains, which typically cost about 22 percent
less than corn. [ID:nN03515308]
The export market also was heating up as China was expected
to step up purchases as part of its plan to stockpile grains.
Exports of distillers' grain rose to a record 5.64 million
tonnes in 2009, worth nearly $1 billion, according to the
Renewable Fuels Association.
A contract will be equivalent to 100 short tons of
distillers' dried grains, CME said. Deliverable grades must
include a minimum of 26 percent protein and 8 percent fat as
well a maximum of 12 percent fiber content and 11.5 percent
Shares of CME Group (CME.O) were up $3.81 at $294.88 in
Nasdaq trading on Tuesday.
(Additional reporting by Michael Hirtzer; Editing by Walter