Milling Yield Premium and Discount Schedule Effective September 2, 2014 in Rough Rice Futures

Effective September 2, 2014, The Board of Trade of the City of Chicago, Inc. (CBOT or Exchange) will amend the milling yield premium and discount fee schedule for the Rough Rice Futures contract.  The United States Department of Agriculture (USDA) has announced the 2014 rice loan rates by class[1].  For the 2014 crop stored in commercial warehouses, the whole kernel (head rice) loan rate for long grain rice is $10.25 per hundredweight (cwt.) and the broken kernel (broken rice) loan rate for long grain rice is $6.18 per cwt.  The Rough Rice futures contract milling yield premium and discount schedule that takes effect on the first delivery day of the September 2014 contract (September 2, 2014) is based on the 20 percent trimmed mean of the 2010 through 2014 USDA loan rates for long grain rice as described below.

USDA Loan Rates – Long Grain Rice ($ per cwt.)

Rough Rice futures specify that head rice over or below 55 percent receives a premium or discount, respectively, and broken rice over or below 15 percent receives a premium or discount, respectively.  Current milling yield premium and discount rates are $10.00 per cwt. for head rice and $6.63 per cwt. for broken rice.  Beginning September 2, 2014, milling yield premium and discount rates will increase to $10.10 per cwt. for head rice and decrease to $6.41 per cwt. for broken rice.  For example, an outstanding warehouse receipt specifying 58 percent head rice and 12 percent broken rice and with an underlying futures price of $16.00 would be delivered at $16.111 per cwt. (16.00 + (.58 - .55)*10.10 – (.15 - .12)*6.41). 

To help the market efficiently price the July – September spread, there were 392 outstanding CBOT Rough Rice warehouse receipts as of March 31, 2014.  The average milling yield for those outstanding receipts was 69 percent with 57 percent head rice.

If you require any additional information, please contact Fred Seamon at 312-634-1587 or via e-mail at Fred.Seamon@cmegroup.com. 

[1] http://www.fsa.usda.gov/Internet/FSA_File/2014ricelr.pdf