A new cash-settled futures contract that has the potential to connect wheat from the export-intensive Black Sea region to the global market is off to a strong start, offering a platform to traders for risk management, arbitrage opportunities with other regional markets and potential cross-hedging strategies.
The Black Sea Wheat (CVB) Financially Settled (Argus) futures will also allow for the effective pricing of wheat from one of the biggest exporting regions in the world, particularly from Romania and Bulgaria that are shipped from the ports of Constanța, Varna and Burgas (collectively known as CVB). Wheat from Romania and Bulgaria are shipped to destinations across the globe alongside Black Sea supplies from Ukraine and Russia.
A total of around 160,000 metric tons of wheat has been traded in the first month since launch in early June 2025, and the contract is also beginning to trade on a more regular basis. Many traders expect the contract to become the leading international benchmark for the Black Sea region. Additionally, some basis trades across the Black Sea and beyond are expected to be concluded against the CVB futures as the pace of trading develops (see hedging example below).
CVB wheat, a reliable benchmark for wider Black Sea trade
The pricing and correlation of CVB wheat to other Black Sea markets make it an effective price-risk management tool for the broader region. Romania and Bulgaria have exported over 56 million tons of wheat since 2020, according to latest data from Eurostat. Romanian and Bulgarian exports have reached around 13 million tons in the latest U.S. marketing year 2024 - 2025 (June - May), according to the data from the U.S. Department of Agriculture (USDA). Export volumes from the CVB ports have increased 16% since 2022.
The daily Argus CVB price is well correlated to the daily Argus price of wheat exports from the Russian Black Sea port of Novorossisk. The stability in overall export levels also help to make the CVB price a reliable price indicator for the broader Black Sea region. The latest published set of Argus daily prices through June 2025 shows a high correlation between their CVB price Free on Board (FOB) and FOB Novorossisk at 0.97, indicating that the Argus CVB wheat price, which is the basis of the CVB futures, could be readily used as a hedging instrument for cargoes loading out of Novorossisk. Typically, a value of more than 0.80 means that prices are well correlated and that traders can use the price of a commodity to hedge an underlying price exposure to the other market.
Historical volatility in the Black Sea wheat markets remains elevated on continued supply uncertainty
The 30-day historical annualized volatility, an important statistical indicator measuring the historical changes in the underlying commodity, shows that CVB wheat has traded in a range of 15% - 30% volatility since September 2023. Higher levels of price volatility typically lead to greater trading interest to manage risk against an underlying commodity.
Basis trading
Basis trading, or the buying and or selling of a commodity in a specific cash market priced against a recognized futures price, is a fundamental concept in agricultural markets.
More specifically, basis is negotiated as a premium or discount to the futures price. The basis takes account of variables such as transportation, handling, storage, quality and currency, as well as local supply/demand factors. A discount or negative basis is where physical prices trade below the futures, while a premium or positive basis trades over the futures. The basis value can be fixed by both parties at the time of agreeing to the trade or left to fluctuate from the time of the trade to the delivery of the physical wheat.
International millers that purchase wheat from the Black Sea can use futures combined with an agreed basis that is negotiated between the seller and the buyer to hedge price risk. Related futures and physical prices typically move up and down together, enabling hedging to occur. With a basis trade, only the difference in price between the physical price and the related futures needs to be agreed between the buyer and seller.
Purchasing physical shipments of wheat from the Black Sea using CVB futures plus an agreed basis enables buyers to trade the CVB futures to hedge price exposure to their local wheat prices either within the Black Sea region or to export destinations
Hedging using basis for international Black Sea wheat buyers
Total exports from the Black Sea region, including Russia, Ukraine, Romania and Bulgaria, in the latest marketing year of 2024 - 2025 were close to 65 million tons. Egypt is a major importer of Black Sea wheat with total volumes reaching around 1.1 million metric tons from Romania, based on the latest data from the United Nations Commodity Trade Database.
Rather than purchasing wheat at a fixed price on a Cost Insurance Freight (CIF) basis delivered to Egypt and taking on the inherent price risk, an Egyptian miller could purchase Romanian wheat at a basis to the CVB futures markets, thereby hedging its exposure to adverse price movements in the CIF price.
As an example, say on June 1, an Egyptian miller approaches a wheat exporter to buy 50,000 metric tons (MT) to be delivered CIF Egypt in September. The wheat exporter offers to supply the wheat CIF Egypt to the miller at a basis of $35 per MT over the September CVB futures contract, currently priced at $220 per MT.
The miller agrees to the futures + basis offer.
Buying this way would enable the miller to lock in the futures price (accounting for about 85% of the purchase price), thereby hedging against an increase in the price of CVB Wheat futures between July and September.
A basis contract of 50,000 MT CIF Egypt September shipment is confirmed with the exporter at $35 over September Black Sea Wheat (CVB) Financially Settled (Argus) futures price ($220/mt at the time of agreeing the contract). On June 1, the miller fixes the full quantity of futures i.e. buys 1,0001 lots of September futures at $220 per MT. As they near the shipment window of September, the miller decides to fix the futures price element of the contract to fully price their basis contract and executes an Exchange of Futures for Physical (EFP).2 On August 30, the miller submits an EFP to transfer its 1,000-lot long position in the September futures contract to the exporter at $265 per MT.
On September 1, the Romanian exporter prepares to ship the 50,000 MT of wheat to the Egyptian miller at the agreed contract price of $265 (September futures EFP price) plus $35 (the basis) = $300 per MT CIF Egypt. Due to the gain of $45 per MT made on the futures account, the net cost paid is $255 per MT. If the Egyptian miller had waited to pay the flat price for September delivery at the end of August, it would have paid an extra $45 per MT reflecting the amount by which the price of CVB wheat futures has increased between July and September.
Comparison of hedging with futures or trading flat price
One of the key advantages to trading futures is that it provides companies with the opportunity to fix the price of forward wheat purchases ahead of any planned delivery. This means companies can build strategic relationships with their key suppliers having already fixed the price in the futures market.
By using Black Sea Wheat (CVB) futures to hedge price risk, companies can focus on product quality with the basis negotiated in advance of the delivery. Volumes can be varied according to need and can be agreed over the short or long term. Once term wheat supply agreements are in place, millers are well placed to negotiate a basis deal with flour buyers fixing contractual volumes over a defined time period. Merchants are also well placed, knowing that they have long-term buying commitments from the mills.
The Black Sea wheat market remains an important source of supply to the global market and the CVB wheat futures contract can be used by the wider market to hedge cargoes supplied from the Black Sea. Itscorrelated prices to other export origins makes it an effective hedging tool and this could attract further clients to use it within their wheat trading portfolios.
There are several additional benefits to using the Black Sea Wheat (CVB) Financially Settled (Argus) futures listed by CME Group:
The CVB futures market is emerging as a new benchmark price for the Black Sea wheat market. The high price correlations to other Black Sea wheat origins such as Novorissisk mean that exports from across the region can potentially be hedged using the CVB futures contract. As the new harvest season gets underway, higher volumes could potentially be hedged using CVB futures, further reinforcing the role for CVB futures as a key benchmark for the Black Sea wheat market.
Source: CME Group