CME Group is moving forward with plans for an alternative European wheat futures market, encouraged by French producers who say incumbent provider Euronext has not fixed shortcomings exposed by poor harvest quality in 2014.

Chicago-based CME, the world's biggest derivatives exchange, has met with the French agricultural cooperatives this month to discuss its project and indicated it could launch its wheat futures as soon as March, with September 2015 as a first delivery position, sources familiar with the discussions said.

CME is due to hold more discussions with French operators in January, according to the sources. The talks are an indication of its continued interest despite its low profile since it confirmed in June it was considering wheat as part of a push into Europe.

At the same time, the cooperatives are also talking with Euronext about further changes to its Paris-based wheat futures <0#BL2:>. Operators are reluctant to ditch a proven price benchmark whose liquidity continues to grow, the sources said.

Cooperatives handle most of the grain grown in France, the European Union's top producer, and so are key market actors.

InVivo, a grouping of some 200 cooperatives, confirmed it had participated in discussions with both Euronext and CME.

"Euronext and CME have each proposed solutions that make sense," Stephane Bernhard, head of trading at InVivo, said, declining to give details. "I think there will be some announcements very soon."

A spokeswoman for CME reiterated that the group was exploring a European wheat contract in response to requests from customers, without commenting further.

Euronext's Head of Commodities, Olivier Raevel, said the exchange was in ongoing discussions with market participants. Issues included delivery points and how the market would operate until new quality specifications are introduced in 2017, he said, declining to give further details.

SILOS AND QUALITY TERMS

Heavy rain turned much of the 2014 French crop into lower-grade wheat and prompted the two Rouen port silos that take delivery of wheat traded on Euronext to impose higher quality standards to protect export sales.

Euronext's later decision to toughen its own quality criteria sought to end confusion about whether it was pricing milling wheat or cheaper animal-feed wheat, but the changes will not apply until 2017.

"We had to put up a lot of money this summer to cover ourselves against the lack of clarity about what Euronext prices represented," one source involved in the discussions with CME said. "The problem has not been fixed for 2015 and 2016."

Euronext's reliance on the Rouen export hub for delivery is seen by some as the root of the problem. CME is proposing a wider network of delivery points in France and this has won support from cooperatives active in inland zones, sources said.

However, French operators fear complications if a CME contract traded in dollars and fell under non-French law, they said.

CME is proposing less strict quality terms than in Euronext's 2017 revamp, such as a minimum 180 for Hagberg falling numbers, a measure of bread quality, compared with the relatively high 220 minimum set by Euronext, sources said.

This has led some operators to call for Euronext to add another contract that reverts to a basic milling standard.

Others argue that there is no room for new wheat contracts in Europe, and that the CME should join forces with Euronext. Both exchanges declined to comment on this.