Washington, D.C. R-CALF USA has contacted newly appointed Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler to request reforms to the U.S. cattle futures market and also has joined with 52 other organizational members of the Commodity Markets Oversight Coalition (CMOC) to persuade the CFTC to aggressively regulate the commodity futures market to prevent excessive speculation and to ensure a fair and orderly market. Additionally, formal correspondence from the CMOC was sent today to the Senate and House leadership to call for meaningful reform of commodities trading.
"R-CALF is working with the CFTC to ensure that the cattle futures market functions properly to provide price discovery and reduce price risk for physical cattle hedgers," said R-CALF USA Marketing Committee Chair Dennis Thornsberry. "The benefits of today's cattle futures market, however, appear to flow primarily to large market speculators and large market participants, while smaller independent U.S. cattle operations find the cattle futures market too susceptible to distortion and the resulting volatility too great to serve as a useful marketing tool.
"We seek reform of the cattle futures market to restore its original purpose of affording U.S. cattle producers a useful marketing tool void of distortion and manipulation by certain speculators and other dominant market participants," he added.
Included in R-CALF USA's letter to the CFTC are requests to prevent packers from engaging in speculative short selling as a strategy to depress cash cattle prices, impose aggregate speculative position limits across all markets, and ensure that speculative position limits be set by physical hedgers.
The CMOC letter urges Congress to grant the CFTC the tools it needs to properly enforce the futures market. The letter explains that the domination by financial speculators "has undermined the commodity markets' function as a hedging and price discovery tool for commercial industry and end-users. These markets were not designed as financial markets, they were designed for commodities hedging and price discovery and we urge that they be restored to this original purpose."
The CMOC letter also urges Congress to investigate foreign investment in the commodities futures market and to take all appropriate action to correct distortions caused by such foreign investments. The letter makes clear that reform of the commodity futures markets needs to be accomplished quickly, and the group asks Congress to "act now."
"Our organizations again urge swift and comprehensive action in order to reform these markets. We urge members of Congress not to be dissuaded or distracted by the "scare tactics" of those in the financial services industry that are profiting from the status quo," the group states in its letter.
"R-CALF hopes both the CFTC and Congress are receptive to these suggestions and will work with us to improve market opportunities for independent U.S. live cattle producers," Thornsberry said. "We hope that the correspondence from R-CALFUSA and the CMOC coalition will spur the CFTC to repair the erosion of public confidence in these markets that has resulted from instances of manipulation, extreme price volatility and excessive speculation."
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