January 15, 2013 / 3:20 PM / in 5 years

Italy bourse mulls more commodity futures after durum wheat

MILAN, Jan 15 (Reuters) - Italy’s stock market is considering adding more commodity futures contracts as it gears up to launch Europe’s first futures market for durum wheat later this month.

“We are studying other derivatives on other agricultural products,” Borsa Italiana Commodities head Ennio Arlandi said on the sidelines of a conference. He would not specify which.

Borsa Italiana, which runs the Milan exchange and is controlled by the London Stock Exchange, will launch its new AGREX futures for durum wheat on Jan. 21 in a move to help Europe’s pasta makers offset price volatility.

Italy is one of the world’s leading producers of durum wheat, which is used mainly to produce pasta in the continent and couscous in North Africa and the Middle East.

“It’s an excellent development,” said Vincenzo Divella, co-CEO of Italian pasta maker Divella. “We have the raw material; we needed something like this to make us more efficient.”

The Paris bourse currently offers futures contracts for milling wheat, rapeseed and maize.

Borsa Italiana’s Arlandi declined to provide numbers on the expected size of the AGREX market but said there was a lot of interest and that he was confident liquidity would not be a major problem.

Arlandi had masterminded Italy’s IDEX power futures market and said he did not rule out the development of a gas futures contract.

Grain futures normally take a long time to attract a large trading base. Trading volumes in a Canadian durum futures contract have been small since its launch at the start of 2012.

Market players have said the Milan futures will not compete directly with the market in Canada, since they serve two distinct production zones and the Canadian futures are based on higher quality grain.

The primary market maker on AGREX will be Casillo Commodities, a firm specialized in the international trade of durum wheat, while Intesa Sanpaolo unit Banca IMI will provide liquidity.

“We buy 70 percent of our durum wheat in Italy, and this market will allow us to better manage price volatility,” Emilio Ferrari, purchasing director at Italian pasta maker Barilla, said.

Barilla, the biggest pasta maker in the world, advised Borsa Italiana on the launch of AGREX. Unlike other pasta producers, Barilla will have direct access to the market without having to go through a bank.

“We will not become a marketmaker, since we want to show we don’t want to command the market,” Ferrari said.

The AGREX futures will trade in 50 tonne contracts on the Italian Derivatives Exchange Market (IDEM), with five maturities available at any one time.

The delivery months will be March, May, September and December.

The southern Italian town of Foggia has been chosen as delivery point for the underlying grain.

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