Euronext uncorks wine futures

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.

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