In a move with historic implications for the wheat trade in the United States, indeed the world, the CME Group last week announced an agreement under which it will purchase the Kansas City Board of Trade for $126 million in cash. Producers, grain merchants and millers have traded hard red winter wheat, the nation’s principal bread wheat, in Kansas City since 1856, five years before the inauguration of President Abraham Lincoln and six years before the establishment of the U.S. Department of Agriculture.

The CME Group earlier purchased the Chicago Board of Trade. When the purchase of the K.C.B.T. is concluded, MGEX (the Minneapolis Grain Exchange) will be the only remaining independent wheat futures exchange in the United States.

The CME Group said it would maintain the K.C.B.T. trading floor for six months after the acquisition. The transaction was expected to close later this year pending approval by K.C.B.T. shareholders and government regulators. Whether that meant there would be pit trading of hard red winter wheat futures and options in Chicago was uncertain, given nearly all trading in the hard red winter wheat contract now is done electronically. On Oct. 18, the day after the CME announcement, only seven wheat futures contracts were traded in the K.C.B.T. open outcry pit. The shift toward electronic trading has helped boost volume in Kansas City wheat futures, which reached a record 6.3 million contracts in 2011.

The CME Group also indicated it will maintain a committee made up of current K.C.B.T. market participants to advise on the hard red winter wheat contract’s terms and conditions for at least three years.
Among the uncertainties to be confronted will be how the cash hard winter wheat basis will be determined and whether the focus of that basis will remain Kansas City.