CME raises margins on commodities

CME Group Inc., the world's largest futures market, raised margins on soybeans, lumber and other commodities after prices surged.

The margin requirement, or the amount of money traders must keep on deposit, for soybeans will rise 18 percent for speculators to $4,388 a contract from $3,713 at the close of business today, CME said in a report on its website. The margin for hedging will also increase 18 percent to $3,250 from $2,750. Soybean futures on the CME's Chicago Board of Trade are up 17 percent this year because of increased demand from China.

Commodity exchanges in the U.S. and Europe have been increasing the cost of trading raw materials such as sugar, silver and cotton. Silver prices have jumped 58 percent this year and cotton surged 63 percent.

“In the past, higher margins have marked the end of bull markets,” said Bill Nelson, a senior economist at Doane Advisory Services Co. in St. Louis. “The margin increase has the feel of an aggressive move to rein in excessive speculative buying in the commodity markets.”

The lumber margin for speculators will increase 18 percent to $1,950 from $1,650, and the rice margin for speculators will increase 5.2 percent to $1,350 from $1,283, CME said. Lumber prices are up 11 percent this year and rice prices jumped 52 percent in the four months through October.

Margins for butter, milk, oats and soybean oil futures will also increase, it said. Commodities trading in October averaged a record 1.1 million contracts a day, up 42 percent from the same month a year earlier, on CME-owned exchanges, CME said.

The margins are being raised as part of a “normal review of market volatility,” CME said in the report. Phone calls and e-mails to CME in Chicago were not immediately returned.