The National Grain and Feed Association (NGFA) recommended in comments to the Commodity Futures Trading Commission (CFTC) that the agency make a number of adjustments to the proposed supplement to its proposed position limits rule, after identifying several areas of concern to commercial grain hedgers.

As noted in the comments sent to the Commission, the outcome of the supplemental rule making is vitally important for NGFA's member firms - bona fide hedgers who are managing physical commodity risk and who depend on futures markets for price discovery and risk management.

The CFTC voted in June to seek public comments on the supplement, which proposes changes to the position limits rule proposed in December 2013. The supplement modifies the procedures originally proposed for anyone seeking exemptions from speculative position limits for non-enumerated bona fide hedging, as well as proposes a new bona fide hedge definition.

NGFA is highly appreciative of improvements made to the bona fide hedge definition relative to the December 2013 proposal. However, despite the improved definition, there are still areas that fall short of meeting the needs of commercial grain hedgers and threaten to constrict use of risk management strategies that have benefitted U.S. farmers and ranchers, agricultural hedgers, and consumers for decades.  

In the context of the supplemental proposal, issues of greatest import for the NGFA include the following:


  • The Supplemental Proposal's bona fide hedge definition is a significant improvement.
  • Administration of non-enumerated bona fide hedge exemptions by exchanges is the correct decision by CFTC.
  • CFTC's "economically appropriate" test needs to be broadened, and price risk must be interpreted more broadly than simple flat-price risk.
  • The five-day rule has potential to negatively impact convergence.
  • Allowing spread exemptions into the last five days of trading must be maintained.

The NGFA letter contended that contracts in which NGFA member firms are most engaged - wheat, corn, soybeans and related commodities - are unique compared to many other commodities addressed in the December 2013 proposal and the supplemental proposal, like metals, energy, financials and others.   

"With respect for the challenge that writing this rule poses to CFTC, the NGFA submits that one size truly cannot fit all," noted M.J. Anderson, chairman of the NGFA's Risk Management Committee and director of risk management and merchandising at the The Andersons Inc., in the comments.

"Markets are so dramatically different for financials or energy or metals than for the legacy agricultural contracts in terms of size and function," he noted. "...[D]enying risk management practices that have been considered bona fide hedges in our markets for decades likewise would have far-reaching negative consequences."

Read NGFA's comments in their entirety here