Comment Text:
I am the grain department manager at United Farmers Mercantile Cooperative in Red Oak, IA. We are a farmer owned cooperative and our main businesses include grain handling, agronomy supplies and service, feed manufacturing.
We rely on many types of hedging transactions to manage our risk in our daily operation, just like thousands of other U.S. agribusiness firms. Managing risk in our business today is more important than ever given the volatility of futures markets in today's environment. I am extremely concerned about the recent CFTC proposed rule as it unnecessarily and dramatically narrows the range of hedging transactions that would be considered bona fide hedges.
Under this new rule, many hedging transactions employed for decades by the industry, and historically considered bona fide by the commission, would be outside the new proposed definition. Anticipatory hedging is very important to our industry and must be maintained as bona fide hedging. Examples of hedging strategies that could be at risk include pre-hedging purchases of producer grain outside trading hours of a futures exchange and also pre-setting futures carrying charges to manage spread risk. Restricting the use of long-accepted strategies will increase costs of hedging for business risk management and ultimately will lead to lower bids to producers and higher consumer prices.
Sincerely,
Kasey Nash
Grain Department Manager
United Farmers Mercantile Cooperative
Red Oak, IA
