Starting in January pending regulatory review, the CME Group will launch Block cheese futures and options.

The new futures and options contracts will be cash-settled to the monthly average price for 40-lb. block cheddar cheese as reported by the USDA’s National Dairy Products Sales Report with each contract representing the equivalent of 20,000 pounds of block cheddar cheese and the tick size of $0.001 per pound.

A progressively volatile relationship between block and barrel cheese has led to an increase in basis risk for a large portion of the hedging community and the CME Group says it has called into question the hedge effectiveness of their current offering.