NCGA’s Niemeyer Testifies on Capitol Hill on Impacts of the Futures Market on Grain Trade (5-15-08)
National Corn Growers Association Corn Board member Garry Niemeyer testified on Capitol Hill today, where he expressed concerns about the lack of convergence between cash and futures markets as the futures contracts expire. During the hearing before the House Agriculture Subcommittee on General Farm Commodities and Risk Management, Niemeyer outlined how large index and hedge funds are having a significant influence on the futures market.
“It is our position that the lack of convergence is a symptom, not the disease,” said Niemeyer, a corn and soybean grower from central Illinois. “Grain markets are not performing with the efficiency in past years and this places farmers directly in the path of an economic storm.”
In his testimony, Niemeyer discussed how the increases in fertilizer, seed, and fuel have dramatically impacted his farming operation.
“Once again, I typically manage the risk of fertilizer prices by forward contracting a portion of my grain. However, no elevators are offering bids for new crop 2009 corn. My options are simple and unpleasant. I can borrow money to buy the fertilizer now, and remain completely exposed to a down turn in corn prices, or wait and remain completely exposed to the price of fertilizer continuing to rise. I am left to hope that should a downturn in grain prices occur, fertilizer prices would drop proportionally with grain prices, a very unlikely outcome.”
Niemeyer also addressed NCGA’s view that the current prices quoted to growers may not be fundamentally supported. He also discussed how speculation has led many people to think they are witnessing the development of a ‘commodity bubble.’
“As this bubble has inflated, it has resulted in hardships for the elevator industry and has been devastating to our livestock customers,” Niemeyer continued. “The sharp rise in prices has also impaired many growers’ ability to do price risk management.”
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