KANSAS CITY, MISSOURI, U.S. — The Kansas City Board of Trade (KCBT) on Sept. 14 announced that its Wheat Contract Committee has recommended adopting the variable storage rate concept to improve the performance of the exchange's hard red winter wheat futures contract.

In a statement, the KCBT said the committee had reviewed "several contract change alternatives" over the last few months "to foster convergence in its wheat futures contract in the delivery period during times of weak basis."

The committee voted 7-2 to propose the variable storage rate to the KCBT's board of directors, with a recommendation that the rule changes take effect with the September 2011 contract month (meaning that the first storage rate change would take effect Sept. 1, 2011).

If and when approved by the KCBT board, the rule changes would be submitted to the KCBT membership for ratification prior to being sent to the Commodity Futures Trading Commission for review and public comment. It is not known yet when the KCBT board will consider the proposal.

The National Grain and Feed Association provided the following summary of the KCBT Wheat Contract Committee's variable storage rate proposal, and compared it to the variable storage rate adopted previously by the CME Group for the Chicago Board of Trade wheat futures contract:

•Base storage rate: The current base storage rate would increase from 4.5¢ per bushel per month ($0.00148 per bushel per day) to 5.5¢ per bushel per month ($0.00181 per bushel per day). That compares to 5¢ per bushel per month for the CBOT wheat contract.

•Calculation of full carry: For the KCBT wheat futures contract, full carry would be calculated using a rolling average 30 business days prior to and including wheat options expiration. That's a shorter period than the CBOT wheat futures contract, under which full carry is calculated every business day during the contract cycle.

•Trigger for increasing variable storage rate: If and when full carry reaches 90%, the variable storage rate would increase 3.5¢ per bushel per month ($0.00115 cents per bushel per day). That compares to the 80% of full carry trigger and 3¢ per bushel per month in the CBOT wheat futures contract.

•Trigger for reducing variable storage rate: If and when full carry declined to more than 50% until reaching 70% of full carry, the variable storage rate would decline by 3.5¢ per bushel per month ($0.00115 per bushel per day). If and when full carry declined to 50% or less, the KCBT wheat variable storage rate would decline to the base minimum of 5.5¢ per bushel per month ($0.00181 per bushel per day). That compares to the CBOT wheat contract's 3-cents-per-bushel-per-month decline when full carry declines to less than 50%.

•Effective date for changing storage rates: Any changes to the variable storage rate for the KCBT wheat futures contact would take effect on the first calendar day of the nearby contract delivery month. That compares to the end of the delivery period for the affected month in the CBOT wheat contract.