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10 October - The combined Paris, Brussels and Amsterdam bourse,
Euronext, has started trading its wine futures contract, Winefex, after
its launch date was postponed due to the September 11 terrorists attacks
in the US. The publicly quoted exchange said it is trading between five
and 10 lots a day at around 38 euros a bottle, and that it expects
activity to pick up over the next two months.
The contracts for fine Bordeaux wines en primeur - which are delivered
in November two years after the grape harvest - run for 28 and a half
months from the July prior to the relevant harvest, giving scope for
hedging and speculation based on late summer weather conditions.
Winefex futures contracts cover three price bands of fine red Bordeaux
wines, including Graves, Saint Emilion and Saint Julien, with each
contract traded for five cases of 12 bottles of 75cl. Although two
London-based companies, WorldwineXchange and Bordeaux Wine Index, have
unveiled plans to launch wine derivatives, Winefex is the only contract
currently available.
Sam Mezrahi, head of business development for Winefex, told RiskNews
that while most of the business has originated from French wine traders
keen to hedge their positions, a few contracts have also been bought by
German brokers. He added that French and English specialist fine wine
retailers have also expressed an interest in the derivatives contracts,
as have French retailers such as the supermarket chain Carrefour.
Mezrahi admitted that although the contracts lack liquidity, sufficient
volatility is present. “Hedge funds have expressed an interest in using
Winefex but they want to wait two or three months to get a feel for the
product,” he added.
Potentially, airlines could be the largest users of the contracts.
“Initially we thought that airlines such as Air France - which buys up
to 50,000 bottles of wine a year - would benefit from using Winefex for
hedging. But since the September 11 terrorist attacks, I think airlines
have other issues on their minds,” said Mezrahi.
Paul Lyon
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