Grain group says CFTC proposal would eliminate risk management tool

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, March 10, 2014 - The National Grain and Feed Association (NGFA) expressed concern today with the Commodity Futures Trading Commission's (CFTC) proposed regulations to establish speculative position limits for futures and swaps on various commodities. The NGFA argued the proposal would potentially increase speculative position limits for users of agricultural futures markets dramatically.

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In a recently submitted statement, the NGFA said that under the CFTC's proposed rule, "we fear that a number of common hedging transactions used for business risk management in the grain, feed and processing sector, but not enumerated in the proposal, could be put at risk."

In its statement, NGFA said its members "rely on a consistent and predictable approach to bona fide hedging and position-limit policy decisions made by the CFTC," and that their risk-management strategies are not structured as an investment or speculative tool.  Rather, NGFA said, grain handlers, processors, feed manufacturers, exporters and agricultural producers rely on futures markets to manage business risk.

 NGFA said the CFTC's proposal to change the definition of what constitutes a bona fide hedge could create uncertainty and invalidate several commonly used hedging transactions, including locking in futures spreads, hedging basis contracts and delayed-price commitments, and anticipatory hedging of commercial transactions and processing or storage capacity. 

To read NGFA's complete comments, click here.

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