Block Cheese futures frequently asked questions
What is launching?
CME Group will launch complementary Cheese futures and options contracts that will cash-settle to the monthly weighted average block cheese price reported by the National Dairy Product Sales Report (NDPSR).
What is the launch date?
The first trade date will be January 13, 2020.
How are these different from the existing Cheese contracts?
Block Cheese futures and options will settle to the block cheese price reported by the NDPSR while cash-settled Cheese futures and options settle to the monthly weighted average of both block cheese and barrel cheese prices reported by the NDPSR.
Why are you launching this contract?
The progressively volatile relationship between block and barrel cheese has led to an increase in basis risk for a large portion of the hedging community and as a result has called into question the hedge effectiveness of our current offering. We have received a great deal of customer feedback stating that they need a hedging instrument that more closely tracks their price exposure.
Are you launching a barrel cheese contract as well?
Possibly, in the future. Customer feedback clearly stated that the more immediate need for the majority of market participants was for an instrument to manage price risk related to block cheese. We continue to be open to making improvements to address the needs of the market and will certainly keep the issue top of mind as we seek feedback.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
