Miller Magazine Issue: 118 October 2019

80 ARTICLE MILLER / OCTOBER 2019 manage price risk. The growing need for sunoil risk management also re- mains as the Black Sea remains the world’s largest sun- oil exporter. To date, much like corn and wheat, cross hedging was utilized mainly in relation to CME Soybean oil, but given the differences present, a strong correla- tion was lacking. Even though at times correlations can be strong- a long lasting correlation was not pres- ent. More recently, on August 26th, 2019, the CME also introduced a sunflower oil contract (BSF) that referenc- es PLATTS spot prices. The mechanics behind the sunoil contract relates very closely to that of wheat and corn. BSF expires financially based on the spot price published from PLATTS. The spot price per PLATTS Sunoil reflects loadings one or two calen- dar months forward from the month of assessment via FOB Chornomorsk and Nikolaev normalized to FOB Chorno- morsk, 3k mt size. Specifica- tions remain raw sunoil, FFA basis 2%, max 3%. Moisture 0.5% Max. Impurities .5% Max, min flash point 121C. hydrocarbons Max 50 mg/kg. Current trading activi- ty remains spread across the whole value chain, from large vertically integrated firms in the Black Sea to consumers and physical traders of Black Sea cash supplies as well. Specula- tors are important to liquidity as well, and there are also banks and hedge funds that show trading interests as well. Some market players also spread risk vs Chica- go wheat, KC wheat and or Matif wheat. The intro- duction of these contracts allow anyone in the world to have direct access to Black Sea wheat and corn without touching the physical prod- uct for the first time. Prior to these contracts the only way to have direct exposure was to buy or sell physical cargos. Trading of these PLATTS contracts have proven suc- cessful for wheat and corn, but as of late open inter- est (the total amount of outstanding contracts) have continued to decrease modestly. As you can see from the below chart, total open interest has remained steady among BWF and BCF futures and options, with