BioFuels Journal

Chicago Board of Trade (CBOT®) Chairman Charles P. Carey testified before the United States Senate Committee on Energy and Natural Resources June 19 regarding the CBOT’s Ethanol futures contract -- the only actively traded denatured ethanol futures contract listed in the U.S.

Chairman Carey commended the U.S. Congress for enacting policies that encourage research, production and use of renewable fuels.

The Energy Policy Act of 2005 included a national Renewable Fuels Standard (RFS) that created a baseline renewable fuel use requirement of 4 billion gallons in 2006, increasing production to 7.5 billion gallons by 2012.

“The CBOT supported the establishment of the RFS and believes its implementation will continue to foster development of the U.S. renewable fuels industry, ultimately establishing a more self-sustainable energy supply and providing a key source of potential revenues for farmers and rural economies in the U.S.,” said Carey.

In his testimony, Carey highlighted the CBOT’s initial involvement in the ethanol industry and recounted how the Exchange saw the need to establish a price risk management tool for the emerging industry.

“In our research we learned that the ethanol industry lacked reliable price discovery and viable price risk management tools,” said Carey.

“Part of the CBOT’s mission is to provide transparent risk management tools of the highest integrity, and to provide a price discovery mechanism and disseminate the prices at which transactions occur on our exchange.”

Since the launch of the CBOT Ethanol futures contract, Carey said the contract has demonstrated steady growth in volume and open interest.

Today, market participants have open interest positions in the contract going out one year into the future and representing more than 24 million gallons of ethanol.

In order to increase availability of the product, in May the CBOT launched its Ethanol contract electronically during the CBOT’s daytime open auction trading hours.

For more information, call Melissa Jarmel at 312-435-7137.

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