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CFTC meeting

Agriculture.com Staff 03/27/2008 @ 1:17pm

The CFTC will be holding a meeting in April to discuss the issue of convergence between cash and expiring futures or lack thereof.

It is a subject that has a profound effect on the suitability of futures as a price discovery tool. My farm business is a long way from Chicago. It is hard to imagine a basis of negative $1.40 for soybeans. Surely, it does not cost that much to ship soybeans five hundred miles and put them in an elevator! The problem is that the system is not really set up to make delivery a viable alternative.

I was on the CFTC Agricultural Advisory committee for six years from 1985 to 1991. The committee was made up of representatives of the major farm and commodity organizations as well as the grain trade. However, we were there for giving advice only and had no power to change anything. There were several active farmers on the committee.

The regulation was done by the members of the commission. The ones I knew were very intelligent and well-meaning individuals. However, most of them were attorneys or economists with no experience in either farming or the grain trade. They did not really have a feel for the effect of the futures market on running a business.

I hope that the meeting in April finds solutions to some of the recent problems in the futures market. Someone needs to attend and testify who has experience in both sides of the grain business. That individual needs be able to express the need for the futures market to better reflect the true value of the underlying commodities. There is a need for practical experience in setting policies in the regulation of the markets.

Maybe we could search out that individual on this web site. I wish I was qualified to be that person, but it has been so long since I was involved in the regulatory function I have forgotten most of what I knew. Does anyone have an idea of who could represent farmers at this important meeting?

The CFTC will be holding a meeting in April to discuss the issue of convergence between cash and expiring futures or lack thereof.

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