2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006

 

3 Dec 2011 - MAJOR CHANGES MAY BE AHEAD

Over the decades I have been covering the agricultural markets in Chicago, the Board of Trade and the Mercantile Exchange, I’ve heard regularly from a few of you demanding that the markets be closed; that they hurt America’s farmers and ranchers. As one farmer put it... “it is a bunch of city guys in silk suits and alligator shoes making money off the sweat of my brow without them doing any work.”

I don’t agree with the statement that we don’t need futures markets because I think if we closed the markets tomorrow, there would be something very similar opening the next day. But there is no question there could be some major changes coming in the way we price agricultural products into the future, particularly in light of the MF Global bankruptcy that continues to play havoc with traders at the Board of Trade and the Mercantile Exchange who were clearing their trades through that firm that went bankrupt.

They were the third largest clearing firm for traders in the Chicago markets and with the bankruptcy filing , those traders were barred from going onto the trading floor to trade their market positions and had no idea where their funds were or if they even were protected. It is becoming apparent that the commodity trader’s segregated funds were being mixed with MF Global funds so CEO Jon Corzine (since resigned) could continue investing in the risky European sovereign debt markets. The investigation now moves to Congress where Committee members not only want to talk to Corzine, but to CFTC officials to see if they were negligent in their oversight.

From all of this, we will probably get more rules and regulations that could hamper the true function of the futures markets, price discovery of grains and livestock.

Then, there is the tax situation in Illinois that could force the exchanges to move out of Chicago. I can’t imagine reporting the grain market from the Indianapolis Board of Trade or livestock futures from the Nashville Mercantile Exchange, but the possibility is there, as the Illinois legislature, battling a huge deficit, refuses to change the tax laws to make it more favorable for those exchanges to remain in Chicago.

These, indeed, are challenging times for the Chicago agricultural markets.

My thoughts on Samuelson Sez.