CME Group is entering the European dairy derivatives market under an agreement with the European Energy Exchange (EEX), and plans to launch its own European dairy indices, futures and options, Reuters reported, citing the exchange operator.

EEX intends to phase out its dairy business and to support the transfer to CME, before the end of 2027, of the indices underpinning its existing dairy futures — including the European butter and skimmed milk powder indices. Existing EEX futures stay available for their listed maturities. The transaction is subject to closing conditions.

The move sets up a contest for European dairy hedging: Euronext is due to launch its own European dairy futures and options on 19 October, also covering butter and skimmed milk powder.

The prize is a large market. The European Union produces about a fifth of the world's cow's milk and accounts for more than 30% of non-fat dry milk exports, CME said, citing the US Department of Agriculture's Foreign Agricultural Service.

For processors and co-operatives that have used EEX contracts to lock in butter and powder prices, the practical change is a new counterparty and a Chicago-run index rather than a new instrument; for farmers the interest is in whether deeper liquidity makes forward pricing of milk more common in Europe, as it is in the United States.

Source: The Cattle Site, citing Reuters