NCGA Corn Board Member Niemeyer Speaks at Commodities Trading Meeting (4-23-08)

National Corn Growers Association (NCGA) Corn Board member Garry Niemeyer addressed the Commodity Futures Trading Commission (CFTC) yesterday where he discussed the impacts of the futures market on the grain trade.

During his remarks, Niemeyer noted large hedge funds are having a substantial influence in the futures markets and stated they should be treated as non-traditional hedgers or speculators.

Additionally, Niemeyer expressed concern for large index and hedge funds that sell a commodity index and then buy futures contracts in each of their market basket commodities because they could be construed as a hedge. In reality, Niemeyer said, “funds are selling a market basket of futures prices, not a market basket of physical commodities.”

“NCGA proposes that index funds should not be afforded the same margin requirements as traditional commercial hedgers,” he added. “To be classified as a hedger, the entity must have a cash position. We are not suggesting that they have an equal or proportional cash position, but somewhere within that company they must be buying or selling cash grain to retain the hedger classification.”

Niemeyer noted the grain market lacks convergence. Convergence is the pattern where cash and futures market prices close to traditional levels. “Lack of convergence has caused the elevators not to accept grain bids for future delivery,” he said. “Unfortunately, farmers are losing a valuable risk management tool just when their risks are at their highest. I am therefore unable to make future grain sales.”

Click here to read Garry Niemeyer's CFTC testimony