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Is shrimp futures trading coming to Minneapolis?

Trading in shrimp futures could begin this summer at the Minneapolis Grain Exchange (MGE) if the idea is approved by the Commodity Futures Trading Commission (CFTC).

The MGE is one of 12 commodity exchanges in the United States. With 402 members, it is far from the largest (the Chicago Board of Trade holds that honor), but it has carved out a profitable niche in such items as red spring wheat (grown in the upper Great Plains of the US and Canada) and white wheat (grown in the Pacific Northwest). At 13.4% last year, its volume grew faster than that of any other exchange, and its share of wheat futures trading has grown from four percent in 1980 to 13% last year ($13 billion worth).

The Chicago Mercantile Exchange actually traded contracts for 16/20 Gulf brown shrimp from 1963-65, before calling it quits due to a lack of interest. Thirty years later, is futures trading in farm-raised and wild white shrimp an idea whose time has come? James Lindau, president of the MGE, predicts that early support should come from major grain exporters like Cargill, Inc., and Continental Grain Co. that are already active in the shrimp farming industry. Further support should come from the shrimp distribution system: farmers, brokers, distributors and retailers.

Yet Red Lobster, the seafood restaurant chain owned by General Mills, is begging off on the whole idea. And Bernie Gilley, head shrimp buyer for Singleton Seafood Corp. -- a ConAgra subsidiary that is one of the biggest shrimp buyers in the country -- threw cold water on it: "We don't intend to participate at all," he said. Lindau isn't fazed, however; he notes that the shrimp business is highly fragmented, with no factor holding more than four percent, and that once the advantages of futures contracts are understood, the industry will come around.

World Shrimp Farming, a San Diego-based publication, handicaps the chances of shrimp futures at one in three, but thinks futures are a good idea. If Burger King, for example, wanted to run a special this June on shrimp, it wouldn't have to wait until June to set the price -- it could buy a futures contract right now. Latin American and other exporters would have up-to-the-minute price information when dealing with importers, and exporters and importers alike would all be dealing with the same market data and thus be able to make faster and fairer deals.

John Filose of Ocean Garden Products, a major shrimp importer, hopes that futures trading becomes a reality. But he has doubts. "It hasn't happened yet, so I'll reserve my judgment," said the marketing vice president.

While an Exchange would be helpful in generating much needed information, Filose had to wonder if independent-minded aquaculturists would deliver a product for unappetizing prices. He explained: "Let's say you buy it this year at X, and the market goes up to X-plus. You're going to have a hard time getting a producer in Ecuador to export it at the previously agreed upon price."

Nonetheless, Minneapolis planners are pushing ahead. They have announced that among the trading guidelines will be: minimum contracts of 5,000-pound units; prices are to be based on 41/50 raw, frozen blocks of shell-on, headless white shrimp from China and Latin America; the maximum daily price fluctuation will be $750 per contract, or 15-cents a pound.
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Title Annotation:Minneapolis Grain Exchange
Publication:Quick Frozen Foods International
Date:Apr 1, 1993
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