Bakers balk at changes to wheat futures contracts
April 25, 2008
by Josh Sosland
WASHINGTON — Concern about changes in wheat futures contracts that could further increase market volatility was voiced this week by baking industry representatives at a Commodity Futures Trading Commission agricultural forum in Washington.
Under consideration by the C.F.T.C. are proposals to raise the speculative limits for agricultural commodities and to create a regulatory exemption from speculative limits for certain risk management purposes.
John Popp, chairman of the Independent Bakers Association, urged the C.F.T.C. to drop the proposal to increase limits in the number of contracts held by a single entity to 14,500 contracts.
Mr. Popp said such an expansion for wheat would allow a single entity "to control 20% of the soft wheat crop, 7% of the hard winter crop and 16% of the spring wheat crop." Mr. Popp is chairman, president and chief executive officer of Aunt Millie’s Bakery, Fort Wayne, Ind.
The impact of market volatility was emphasized by the American Bakers Association, represented by David Brown, chairman of the A.B.A. commodity task force.
"The futures markets were created as a regulated medium to allow physical commodity users to purchase goods from producers," said Mr. Brown, who is vice-president of procurement at Sara Lee Corp. "Now these businesses that rely on purchasing commodities to provide the country with food are being pushed out of the market due to increased speculation and a general move away from the original intent of the exchanges."
Walt Lukken, acting chairman of the C.F.T.C., said the commission would not rush forward the new proposals.
"While we have requested and received public comment on these proposals, given current market conditions and the uncertainty surrounding additional speculative money on these markets, I will be very cautious about moving forward with such initiatives at this time," he said.
This remark drew cheers from the A.B.A.
"A.B.A. was extremely pleased to hear today from Chairman Lukken that the C.F.T.C. is holding off at this time on implementing either of its recently proposed rules in light of current market volatility," said Cory Martin, A.B.A.’s federal government relations manager. "A.B.A. believes both of these proposed rules may only exacerbate the volatility we are currently experiencing."