Soybean Rust (SBR) Detection Contract

Soybean Rust (SBR) Detection Contract

Fact Sheet

The occurrence of soybean rust in the U.S. is cause of great concern since its first confirmed detection on Nov. 10, 2004 in Louisiana. Since then, soybean rust, a disease spread primarily by wind-borne spores, has been confirmed in eight other states: Alabama, Arkansas, Florida, Georgia, Mississippi, Missouri, South Carolina, and Tennessee.

Soybean rust is caused by either of two fungal species, Phakopsora pachyrhizi, also known as the Asian species, and Phakopsora meibomiae, the New World species. The Asian species, the one found in Louisiana, is the more aggressive of the two species, causing more damage to soybean plants.

According to a study conducted by the Economic Research Services[1], the economic losses in the first year of SBR infestation, assuming that U.S. producers are able to treat with fungicides upon SBR detection and the outbreak occurs across all U.S. production areas, would range from $640 million to $1,341 million, depending on the severity of infestation. Thereafter, average annual economic losses could reach as high as $2.0 billion, depending on the severity and extent of annual outbreaks. Soybean producers will shoulder 60 to 70 percent of total losses, with U.S. consumers and livestock producers bearing the rest.

With the possibility of economic loss in mind this growing season, Soybean Rust Detection Contracts should be offered for each of the major soybean producing states: Illinois, Iowa, Indiana, Minnesota, Nebraska, Ohio, South Dakota.

Salient Points:

The SBR Detection Contract is a 0-100 Contract that the specified event occurs on or before 11:59 pm ET on the specified date in the specified state. The expiry price will be 100 if the specified event does occur and 0 if it does not.

The Result used to determine the expiry prices will be the official announcement released by the United States Department of Agriculture (USDA) based on findings at the National Plant Germplasm and Biotechnology Laboratory in Beltsville, Md. of a confirmed detection of soybean rust.

The SBR Detection Contract is a time protected market, i.e., the expiry price is determined by a news announcement. The Exchange reserves the right to pause the market, halt all trading and unwind ALL trades time stamped within one hour prior to the first news story/announcement appearing on Associated Press new service or another similar major news provider.

0-100 Contract Specifications

Minimum Price 0

Maximum Price 100

Tick Size 1

Tick Value $0.10

Five SBR Detection Contracts should be listed for each of the seven states: Illinois, Iowa, Indiana, Minnesota, Nebraska, Ohio, and South Dakota with expirations on June 30, July 31, August 31, September 30, and December 31, 2005.

USDA information about Soybean rust can be found at:

SBR Recent News http://www.aphis.usda.gov/lpa/issues/sbr/sbr.html

Soybean Rust Resource Website http://www.aphis.usda.gov/ppq/ep/soybean_rust/

Cooperative Agriculture Pest Survey program http://www.ceris.purdue.edu/napis/pests/asbr/imap/asbr04.html

[1] Potential Economic and Policy Implications of the Wind-Borne Entry of Asian Soybean Rust into the United States, by Michael Livingston, Robert Johansson, Stan Daberkow, Michael Roberts, Mark Ash, and Vince Breneman, OCS-04D-02, USDA/ERS, April 2004.