CONFIDENCE IN the London potato futures, launched in January 2003, received a boost last week (April 30) when the April contract closed at exactly the same price as the UK cash market.
This was an important milestone for the Germany-based exchange in Hanover as it proved that the futures accurately reflected the physical market, said head of trading operations, Hans Christian Koltze.
“Everybody was very happy with this as it is the perfect convergence between the futures and the cash market,” he said.
The cash settlement price is fixed at the British Potato Council‘s spot average price at the end of the month, after conversion into Euros.
This was €27.20/100kg (£183.25/t) for the April contract.
The old London-based potato futures often did not reflect the physical market, eroding confidence in its usefulness for hedging of sales and purchases.
The WTB exchange has traded over 175,000t of London potato futures since its launch last year, but a greater tonnage is required to improve liquidity.
“It does take time to get confidence back into a market,” said Martin Hodis, a broker for ADM, which is the only UK member of the WTB exchange.
“But we need the processors to come in and add volume.”
Physical prices continue to rise due to a shortage of good quality potatoes.
The BPC spot average price increased by £6.41/t last week although resistance from buyers meant the weekly average price, including contracts, rose only slightly, to £158.84/t.