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Deliverable Grades for CBOT Rough Rice Futures

On August 18, 2006, the U.S. Department of Agriculture (USDA) issued a statement concerning a notification they received from Bayer CropSciences related to a recent finding of trace amounts of regulated genetically engineered (GE) rice in samples of commercial long grain rice. This statement also notes that USDA and the U.S. Food and Drug Administration (FDA) have reviewed the available scientific data and concluded that there are no human health, food safety, or environmental concerns associated with this GE rice.

Chicago Board of Trade Regulation 3701.01, Rough Rice Contract Specifications, states:

" All futures contracts shall be for U.S. No. 2 or better long grain rough rice as the same is established by standards promulgated by the United States Department of Agriculture (U.S.D.A.) at the time of the first day of trading in a particular contract. No heat-damaged kernels as defined by USDA FGIS Interpretive Line Slide 2.0 are permitted in a 500-gram sample. No stained kernels as defined by USDA FGIS Interpretive Line Slide 2.1 are permitted in a 500-gram sample. A maximum of 75 lightly discolored kernels as defined by USDA FGIS Interpretive Line Slide 2.2 are permitted in a 500-gram sample. No other grade is deliverable.

To be deliverable, rough rice shall have a milling yield of not less than 65%, including not less than 48% head rice. Each percent of head rice over or below 55% shall receive a 1.5% premium or discount, respectively, toward the settlement price for long grain rough rice and each percent of broken rice over or below 15% shall receive a .75% premium or discount, respectively. All rough rice shall be of a Southern origin or such other origin as the Exchange may approve.”

Therefore, since there are currently no grading factors explicitly addressing GE rice included in USDA grade standards or in CBOT rules, GE rice may be delivered in satisfaction of futures contracts under the CBOT Rules and Regulations.

The USDA Statement reporting the information that USDA and FDA have received regarding the finding of trace amounts of GE rice in commercial long grain rice is available at www.usda.gov. If you have any questions, please contract Joe Hawrysz (312-341-7750) in the Office of Investigations and Audits or David Lehman (312-347-3848) in Business Development.

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