NGFA National Grain and Feed Association : Leads Industry Effort with CFTC; Position Limits, Bona Fide Hedge Definition at Stake

Posted by Todd Kemp on January 23, 2015

The NGFA on Jan. 22 submitted its third statement in a series of comments to the Commodity Futures Trading Commission (CFTC) concerning a rulemaking that could have broad impacts on futures market performance and hedging efficiency for the grain, feed, processing and export industry. For a second time, the CFTC re-opened its public comment period on its speculative position limit proposed rule - this time, to incorporate input from and subsequent to a Dec. 9 meeting of the CFTC Agricultural Advisory Committee.

In addition to the NGFA statement, approximately 50 NGFA-member firms also submitted comments to the commission in response to a recent NGFA Member Advisory. Key concerns focus on a CFTC attempt to redefine transactions that qualify for bona fide hedge treatment and would dramatically narrow bona fide hedging strategies; and a new regime for establishing speculative position limits, which could lead to large increases for certain contracts in the grain and oilseed complex.

In response, the NGFA recommended that restricting bona fide hedging strategies ultimately would negatively impact agribusiness hedgers by raising costs of hedging, and likely would result in lower price bids to producers and impacts on consumers. Further, the NGFA letter reiterates industry concerns that setting too-large speculative position limits would impede contract performance and threaten convergence.

NGFA's comments were accompanied by two earlier statements to the commission from previous comment periods - one of them appended by a number of examples of hedging strategies that the NGFA urged should continue to be categorized as bona fide by the CFTC.

had been filed with the commission since the original proposal was issued in Nov. 2013. Following a review of the latest feedback, the CFTC could consider a final rule in mid-2015.

Todd Kemp

Vice President of Marketing and Treasurer Todd Kemp is responsible for the overall management and direction of the NGFA's membership recruitment, development and retention programs. He is principal staff liaison to the Membership and Marketing Committee, Risk Management Committee and Finance and Administration Committee. He also spearheads the marketing of NGFA products and services.