Future proofing milk in Chicago

The trading floor atmosphere is a world away from an afternoon milking in the cowshed. It's like a racecourse humming minutes out from the big race, or peak hour at the casino. It's one of the hearts of the business world and millions of dollars are changing hands every day reports The Taranaki Daily. This is the Chicago Mercantile Exchange (CME), the Wall Street of the world's futures markets.In 2008, US$3.8 billion worth of futures trading took place. And while many New Zealanders already indulge in futures trading, the opportunity is about to expand: sharemarket operator NZX plans to launch a global dairy futures platform.The world of market trading might be a massive leap from life on the farm, but in America, a growing number of farmers carefully watch the goings-on at the CME and even take part in the trading themselves. Futures trading is based on a simple concept of managing - or "hedging" - risk and creating certainty over price for both buyers and sellers of products exposed to volatile prices. It has been around in some form or another since the 12th century in Europe, and in the 1600s, the first organised futures trading market was running in Japan. Futures trading used to be largely the domain of agricultural products, but these days, many other products are also involved: commodities, shares, interest rates and foreign exchange. And scenes like those on the floor of the CME are slowly giving way, too, as internet trading gets off the ground. However the trading is done, though, it's an exciting business involving big money and big risks. Fonterra's there, using futures trading to manage the risk it faces when buying United States milk. The trading in Chicago sets the price for whatever is being traded and the information is then dispersed around the globe, he said.