Market Matters Blog           08/24 08:34

   Chicago Mercantile Exchange Launches Sorghum Basis Futures Contract

   CME has specifically designed the new sorghum contract to help producers 
hedge the spread between sorghum and corn prices.

Mary Kennedy
DTN Basis Analyst

   On July 21, 2026, Chicago Mercantile Exchange (CME) Group announced plans to 
launch sorghum basis futures and trading, which after regulatory approval, will 
start trading Aug. 24, 2026, on the Chicago Board of Trade (CBOT).

   "The new basis contract reflects the price difference between sorghum and 
corn -- two types of grain used in animal feed as well as ethanol feedstock. 
Sorghum's premium over corn usually signals international demand driving values 
higher. A deep discount compels domestic buyers to shift feed rations toward 
cheaper sorghum," according to the CME news release.

   "While sorghum prices tend to track corn closely over extended macroeconomic 
cycles, geopolitical events and regional supply shifts can disrupt that 
relationship," said John Ricci, managing director and global head of 
agricultural products, CME Group. "In recent years, the sorghum-to-corn cash 
spread has experienced considerable volatility, swinging from sharp premiums to 
steep discounts. The sorghum futures contract will provide market participants 
a precise instrument to hedge that basis risk."

   The contracts will be physically delivered, with grain being loaded out by 
truck or rail from a network of elevators in Kansas, the nation's largest 
sorghum-producing state, by using the established Kansas City Hard Red Winter 
Wheat delivery network. According to KC HRW wheat rule No. 14H06, "Delivery 
Points, Regular elevators or warehouses shall be located in the switching 
limits of: 1.) Kansas City, Missouri/Kansas; 2.) Hutchinson, Kansas; 3.) 
Salina/Abilene, Kansas; or 4.) Wichita, Kansas."

   It is interesting to note that during the 1970s, grain sorghum contracts 
were tried at both the CBOT and KCBT but failed to gain traction. In May 1989, 
KCBT revived and relaunched a "redesigned" grain sorghum futures contract, but 
in December 1999, KCBT delisted the contract. According to the National Sorghum 
Producers website on Feb. 4, 2022, "because of the liquidity issues with KCBT 
sorghum contract, grain buyers continued to use the corn contract, which 
suggested the basis risk between corn futures and cash sorghum wasn't anything 
that couldn't be managed."

   Fast-forward to 2026. The CME noted on its website, "Although sorghum 
correlates with corn over long horizons, localized supply dynamics and 
geopolitical factors frequently cause the cash spread between the two grains to 
fluctuate significantly. Priced directly as a differential to corn futures, the 
new 5,000-bushel sorghum basis contract allows market participants to isolate 
and manage this specific structural risk, bypassing flat-price liquidity 
hurdles and avoiding exposure to the directional price movements of the broader 
grain complex."

   Here is a link to the new sorghum contract information: 
https://www.cmegroup.com/markets/agriculture/grains/sorghum.

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow her on social platform X @MaryCKenn




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