Chicago Mercantile Exchange, the largest U.S. futures exchange, announced its plans to list ethanol futures contracts, the exchange’s first-ever electronic energy contract. The futures are scheduled to begin trading on March 29, 2005, and will trade on the CME Globex electronic platform.
Sempra Commodities, one of North America’s largest full-service energy trading companies, will serve as the market maker.
“As a result of the Clean Air Act, the ethanol industry has boomed over the past few years. In 2004, U.S. ethanol facilities set new production records and consumers used more than three billion gallons of ethanol in their cars,” said John Harangody, Director, CME Commodity Products. “The launch of CME Ethanol futures, the first electronically traded ethanol contract, will provide the industry with a superior risk management tool, create trading opportunities for those looking to capitalize on the constant fluctuations in this market and potentially attract new customers to our markets.”
“We are pleased to have this opportunity to work with one of the world’s most innovative and dynamic financial exchanges,” said John Brooks, Vice President, Bio Fuels, Marketing and Trading, Sempra Commodities. “This contract offers price transparency, the execution speed of electronic trading and a level playing field for all market participants. Given CME’s successful track record in launching new products, and the market need for sophisticated risk management tools, I am confident that CME ethanol futures will be well received.”
Ethanol is an alternative fuel produced by fermenting and distilling starch crops, usually corn, which have been converted into simple sugars and then to ethanol. Most commonly used to increase octane and improve the emissions quality of gasoline, it has the potential to reduce dependence on oil. U.S. federal legislation already includes provisions encouraging the use of ethanol and, internationally, other nations are launching initiatives to increase the use and production of ethanol.
It is likely that 2005 will be another record-setting year for the ethanol industry. Currently, there are 81 ethanol plants nationwide with a combined capacity to produce more than 3.6 billion gallons of ethanol annually, according to the Renewable Fuels Association (RFA). Sixteen ethanol plants are under construction and two major expansions are under way. When those projects are finished, RFA estimates that the ethanol manufacturing industry will have a total production capacity of 4.35 billion gallons annually.
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