November 14, 2012 / 9:41 PM / 5 years ago

Miss. River closure unlikely to alter CBOT loading rules -CME

CHICAGO, Nov 14 (Reuters) - The CME Group said on Wednesday that the prospect of commercial barge traffic being halted on the Mississippi River next month due to water conservation measures is unlikely to affect its rules about loading and delivering grain against Chicago Board of Trade futures.

Barge traffic on the Mississippi River may be restricted or halted entirely from St. Louis to Cairo, Illinois, in mid-December as drought conservation measures stem the inflow of water from the Missouri River, government and industry sources have said.

That stretch of the Mississippi is a key grain shipping artery connecting farms in the Midwest with export terminals at the Gulf Coast, and grain traders wondered whether a disruption might interfere with the ability of commercial grain facilities at CBOT delivery points to load Gulf-bound barges.

Because the delivery points for CBOT corn futures are located on the Illinois River, which flows into the Mississippi, CME said in a statement that an obstruction on the Mississippi from St. Louis to Cairo “would be unlikely to result in a condition of load impossibility and Force Majeure.”

However, some CBOT soybean and wheat delivery points are located in the St. Louis area, and CME said closing the St. Louis-to-Cairo section of the Mississippi could affect those delivery points.

Under that scenario, the exchange said, existing CBOT rules would require any affected grain delivery facility “to arrange for water conveyance to be loaded at another regular facility and compensate the taker for any transportation loss resulting from the change in location.”

First notice day for deliveries against CBOT December corn and wheat futures is Nov. 30, and first delivery day is Dec. 3. For soybeans, the first delivery day against the January contract is Jan. 2, 2013.

Some analysts questioned the likelihood of a major disruption to Mississippi River barge traffic next month.

“I would give it maybe a 25 percent chance that the river actually ends up being closed. It’s become a political issue now. People are squawking to Washington like crazy,” said Charlie Sernatinger with ABN AMRO in Chicago.

“The argument has been made that closing a major highway of commerce during a slow economy is just not the way to go,” Sernatinger said.

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