February 6, 2008

US grain handlers urge government to slow down on new fund rules

The largest US grain industry organization urged the government Tuesday to reject proposals that allow Wall Street investment funds to take more active positions in grain futures markets.

The National Grain and Feed Association (NGFA) said it appealed to the Commodity Futures Trading Commission (CFTC) to oppose proposals of new "risk-management exemption" on the size of speculative positions that index and pension fund traders can control in grain futures or options contracts.

NGFA, which groups 900 US grain processors and exporters operating about 6,000 facilities, recently raised alarms about the financial squeeze its members are in due to unprecedented rallies in grain prices.

The association said that there has been a huge influx of investment money from Wall Street investors for part of the price gains, which have created huge strains on grain owners to pay higher and higher margin calls to finance bank-mandated hedges in futures.

NGFA last year alerted the CFTC and the Chicago Board of Trade, a CME Group subsidiary, that the decades-old system of futures hedging was showing serious strains.

CFTC was urged by NGFA for a more detailed trading information on index or pension funds, or swaps dealers hedging over-the-counter transactions with such funds.