WASHINGTON D.C. – The American Bakers Association (ABA) again calls on the Commodity Futures Trading Commission (CFTC) to take immediate action in addressing volatility in the wheat markets. “The market has become dysfunctional,” said Robb MacKie, ABA president and CEO. “Bakers and other true commercial users are finding it increasingly difficult to use the wheat futures markets for price discovery. Simply put, the markets just aren’t working like they are supposed to.” “The wheat markets were created for the primary purpose of allowing producers to sell and wheat users to purchase wheat,” said Cory Martin, ABA senior manager of government relations and ABA liaison to the Commodity and Agricultural Policy Committee. “Unfortunately, today these markets are overrun by firms investing in wheat as you would invest in real estate. Wheat was never meant to be an asset class.”
“ABA warned the CFTC in late April that convergence was going to continue to be a major issue in the wheat markets,” added MacKie. “While bakers and other wheat users across the country are straining to work within an ineffective market, wheat farmers in Kansas are facing issues with a severe lack of convergence. The traditional users of the market are struggling while the index funds continue to hold or add to their positions, indifferent to the difficulties they are creating for farmers and food producers."
ABA will be participating in the August 5 CFTC Agricultural Advisory Committee Meeting to discuss solutions to this issue with other market participants. In addition, ABA is currently drafting comments to urge the CFTC to remove exemptions on the funds in accordance to the guidance given in the recently passed financial regulatory reform bill. “Making further tweaks to the wheat contract without addressing the root of the problem will only continue to harm traditional market participants,” added Martin. “The CFTC must take the necessary step of removing position limits on index funds in order to allow for true price discovery in the market.”
#
About the American Bakers Association:
The American Bakers Association (ABA) is the Washington D.C.-based voice of the wholesale baking industry. Since 1897, ABA has represented the interests of bakers before the U.S. Congress, federal agencies, and international regulatory authorities. ABA advocates on behalf of more than 700 baking facilities and baking company suppliers. ABA members produce bread, rolls, crackers, bagels, sweet goods, tortillas and many other wholesome, nutritious, baked products for America’s families. The baking industry generates more than $70 billion in economic activity annually and employs close to half a million highly skilled people.
Source: American Bakers Association