CME May Raise Daily Limit On CBOT Corn Trading

CHICAGO—CME Group Inc. may increase the limit on daily price moves for U.S. corn futures in the face of record highs.

The limit for one-day gains or losses at the Chicago Board of Trade could expand to 50 cents from 30 cents, CME spokesman Chris Grams said Tuesday.

Corn futures set all-time highs earlier this month as demand for the grain remains strong even as supplies are on track to hit a 15-year low.

Increased trading limits would allow prices to respond more quickly to changes in weather and other factors that can affect supply and demand. Higher limits also could increase volatility, allowing large swings in prices.

Increasing limits is "something that we're considering and talking with market participants about," Mr. Grams said.

He declined to provide additional details on the discussions. A change in the daily limit would need to be approved by the U.S. Commodity Futures Trading Commission.

The exchange last widened the limit for corn in March 2008 with an increase to 30 cents from 20 cents. Corn futures at the time were trading around $5.50 a bushel and ended up climbing to a record high of $7.65 a bushel in June of that year. That record was broken earlier this month with the market reaching $7.8375 a bushel.

Market participants said the exchange should increase the daily limit to reflect the surge in prices.

"The prices are appreciating so the limits represent a smaller and smaller percentage. They're just not adequate," said Sal Gilbertie, lead portfolio manager of the Teucrium Corn Fund, an exchange-traded fund worth nearly $103 million.

Traders noted the expanded limit could be particularly necessary this summer as weather forecasts will have a dramatic effect on prices. The market is highly sensitive to weather that can affect output since farmers need to harvest a large crop next fall to replenish precariously low stockpiles.

"We haven't that many limit-up or -down days, but we're getting into the weather season so it certainly could start," said Jack Scoville, vice president of Price Futures Group, a brokerage in Chicago.

Trading stops when a futures contract rises or falls to the daily limit as a way of controlling risk for market participants. Traders could face crushing margin calls on their positions if prices were allowed to fluctuate without limits.

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