Record ag trading boosts CME’s profit

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CME Group officials report a second-quarter profit that rose 8.5 percent, fueled by a commodities boom that sent prices for cattle, corn and hogs to all-time highs and generated record agricultural trading.

Trading CME’s agricultural futures and options averaged 1.159 million contracts a day during the quarter, up 36 percent from 855,000 a day during the same period in 2010 and a record for any quarter, the Chicago-based exchange operator said in a July 28 statement.

The second-quarter agriculture trading increase was the largest among CME’s six product lines – by comparison, trading in interest rate-based contracts rose 6.3 percent, while energy trading fell 2.3 percent. Overall trading was little-changed, though CME still posted record quarterly revenue at $838.3 million

Grain and livestock futures rallied to records earlier this year, reflecting shrinking supplies, crop shortfalls and growing demand as global economies grew. Heightened supply uncertainty led to wider price swings, encouraging more trading by hedge funds, swap dealers and other speculators.

Around midday July 28, CME corn futures for December delivery fell 8 cents to $6.83 ½ a bushel. Corn futures, CME’s most actively-traded agricultural contract, touched a record $7.99 ¾ a bushel on June 10 and are up more than 90 percent from mid-2010, based on closest-to-expiration futures.

August live cattle futures rose 0.225 cent to $1.113 a pound at midday. Cattle futures hit a record $1.22875 on April 5. In lean hog futures, the August contract rose 0.6 cent to $1.02525 a pound, after climbing to the highest price in nearly four months. Hogs reached a record $1.042 on April 14.

Trading in CME’s core financial products also rose as Greece’s debt crisis contributed to volatile global markets, boosting demand for contracts based on Treasury bonds and notes. Wall Street banks and others use CME contracts such as Eurodollars to speculate and protect against adverse market moves.

Overall, CME trading volume averaged 13.53 million contracts a day during the quarter, similar to levels from a year earlier. About 85 percent of CME volume was conducted electronically, with the rest executed through traditional “open outcry” in the exchange’s trading pits.

“We remain confident about our growth prospects,” Craig Donohue, CME’s chief executive officer, said in the statement.

CME, which bought the Chicago Board of Trade for $12 billion in 2007, generates revenue primarily through transaction and clearing fees charged to brokers, banks and other customers. During the second quarter, the cost to buy and sell an agricultural contract averaged $1.30, up 2.1 cents from a year earlier.

During the quarter ended June 30, CME had net income of $293.7 million, up from $270.7 million in the same period a year earlier, the company said in the statement. Revenue of $838.3 million was up 3 percent.

CME’s per-share profit of $4.38 topped analysts’ expectations by about 21 cents, sending the company’s shares higher. In midday trading July 28, CME shares rose $7.63, or 2.7 percent, to $2896.14. The stock is still down 11 percent this year.



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