New Micro Agricultural futures are a tool for retail traders looking to gain exposure to commodity markets without incurring the risk of physical delivery and with less margin costs than standard Agricultural futures. 

An asset manager looking to enhance a commodity index position with greater exposure to one component could pair a Bloomberg Commodity Index (BCOM) or The S&P GSCI Commodity Index position with a Micro Ag contract. For example, a trader could trade a long position in BCOM with a short position in Micro Wheat futures, tweaking the combined exposure towards a bearish wheat view while retaining exposure from the greater index. The small size of Micro Agricultural futures allows optimal pairing with commodity indices for creating a bespoke precision view. 

A dairy producer can take advantage of the smaller contract size of Micro Agricultural futures to hedge price changes in corn and soybean meal, which are primary inputs to animal feed. While a standard Soybean Meal futures contract carries 100 short tons, for example, a farmer could opt to cover part of his feed demand with Micro Soybean Meal futures, with an underlying of only 10 short tons. With an earlier contract expiration date compared to standard physically delivered futures, a producer trading Micro Agricultural futures need not worry about the possibility of physical delivery. 

Market participants standing at the intersection of energy and agriculture can use Micro Agricultural futures to pair with products across units, for example, Palm Oil and Soybean Oil, for more precise volume equivalence. While Soybean Oil futures are sized at 60,000 pounds (~27.22 MT), Palm Oil trades in 25 metric ton increments. Sized at 1/10 the underlying contract unit of standard futures, Micro Soybean Oil futures sit at only 6,000 pounds (~2.2722 MT), allowing for precise equivalence at a ratio of 9:1 Micro Soybean Oil:Palm Oil. This combination creates a closer volume match than would a 1:1 ratio of Soybean Oil futures to Palm Oil futures. 

The smaller Micro Soybean Oil Futures reduce the slippage of any BOPO trades.

Source: CME Group

More precise pairs can be also created between Soybean Oil, Heating Oil or Palm Oil or Corn and Ethanol.

Additionally, the cash-settled aspect of Micro Ag futures make them useful for spreading with Micro Energy products such as Micro WTI Crude Oil and Micro Henry Hub Natural Gas futures. With energy participants also looking to avoid the risk of physical agricultural delivery, participants spreading Micro Agricultural and Energy futures can trade their respective positions up until expiration without the spot-month constraints inherent in physically delivered products.

According to the USDA, the average farm in the U.S. consists of 464 acres. Small- to medium-size farmers can take advantage of Micro Agricultural futures to hedge parts of their expected harvest, without having to rely on standard Grains futures contracts of 5,000 bushels. The opportunity to trade Micro Agricultural futures that reflect no more than the necessary physical hedge could reduce margin costs, giving producers more to spend on operations. 

Supply constraints, dynamic weather patterns, changes in demand profile and heightened geopolitical tensions are likely to continue to drive volatility into the commodities markets in 2025. As producers and traders focus on managing risks in all segments of their operations, Micro Agricultural futures can provide exposure to raw material markets in all portfolios, along with our standard products and options, helping clients to create spreads, size up or down, depending on individual needs. That means more capital efficiency with smaller margins requirements, reduced fees and more choices to manage risk.

Because of their smaller size compared to standard futures, new Micro Ags allow for more diversification in strategies and less overnight margins requirements, allowing market participants to reduce operating costs while fine-tuning their exposure. Learn more at cmegroup.com/microags.