Liquidity in European milk futures will now be spread across parallel markets, as US-based CME Group takes over the milk trading business from the European Energy Exchange, whilst Dutch Euronext lists its own butter and SMP futures and options. For producers, processors and traders who hedge milk price risks, this means that trades will now be settled in more than one venue. The economic question is no longer whether hedging still works, but where the volume will ultimately end up.

John Lancaster, Head of EMEA Dairy and Food Consulting at StoneX: “From a risk management perspective, this is merely a change of trading venue, not a change to the contract structure. The contracts in question relate to skimmed milk powder, butter, whey and drinking milk, and the CME Group will list the same specifications jointly rather than redesigning them. A hedging programme based on the existing European milk futures does not need to be redrafted, remodelled or adjusted in scope, as the settlement mechanisms will be carried over unchanged.”