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Is Potential CFTC Ruling More Important than Farm Bill?

June 9, 2011
By: Ed Clark, Top Producer Business and Issues Editor

The government is on a hunt to restrict speculation in commodity markets and that could make it more difficult to create and sustain crop price rallies. That’s the view of Bill Biedermann, Allendale Inc., a market research and brokerage firm in Crystal Lake, Ill. Biedermann spoke at the Top Producer Summer Seminar this week in Bettendorf, Iowa. Biedermann’s view is that potential action on the issue by the Commodity Futures Trading Commission (CFTC) may be more important than the new farm bill.

One illustration he gives as to why is that at one point during 2010, funds owned up to 52% of soybean futures contracts on the Chicago Board of Trade. “They don’t even use beans,” Biedermann states. So far, the government has reduced what it regards as excessive speculation on energy contracts, to create more orderly marketing, he adds. “Now the government has soybeans as its target.” The Obama administration has publicly stated that it intends to eliminate excessive speculation, Biedermann says. That would restrict hedge funds to own just a certain amount of contacts.
Ironically, he continues, is that the CFTC already has such rules on the books, it’s just that the agency has been granting wavers to hedge funds.
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