NGFA Urges Hedgers to Submit Comments on Key CFTC Rulemaking

The Commodity Futures Trading Commission (CFTC) is accepting public comments on a proposed rule critically important to the grain, feed and processing industry. The National Grain and Feed Association is urging all firms that utilize futures to hedge their business risks to comment on the following rulemaking:

Speculative Position Limits/Bona Fide Hedging Definition

Comment Deadline: Jan. 22

The proposed rule contains a new procedure for determining speculative position limits; however, the proposed rule's effort to redefine transactions that qualify for bona fide hedging status is even more concerning. In essence, the proposed rule would dramatically narrow the range of hedging transactions - many of them routinely used by grain handlers and processors - that would qualify for bona fide hedge status.

In 2014, NGFA submitted two comment letters and will submit another before the Jan. 22 deadline. For additional information, see the:

• February 10, 2014 letter, 21 pages (Note, this letter supplies numerous examples of transactions that could be affected adversely if the proposal is adopted as written.)

• August 4, 2014 letter, 3 pages

In comments to the CFTC, companies are encouraged to stress the impact of the proposal on their individual businesses and to include, in particular, the following points:

• Thousands of U.S. agribusiness firms rely on many types of hedging transactions to manage risk appropriately in their daily business operations.

• The CFTC-proposed rule unnecessarily and dramatically narrows the range of hedging transactions that would be considered bona fide hedges.

• Many hedging transactions employed for decades by the industry, and historically considered bona fide by the commission, would be outside the new proposed definition.

• In particular, anticipatory hedging is very important to our industry and must be maintained as bona fide hedging. Examples of hedging strategies that could be at risk include:

• Pre-hedging purchases of producer grain outside trading hours of a futures exchange.

• Pre-setting futures carrying charges to manage spread risk.

• Restricting the use of long-accepted strategies will increase costs of hedging for business risk management and ultimately will lead to lower bids to producers and higher consumer prices.

How to Submit Comments

Submit comments by Jan. 22 on the position limits/bona fide hedging definition though the online CFTC form. Alternatively, mail comments to: