Comment Text:
I'm a manager for Demeter LP, a small grain company in Northern Illinois, which has 3 fully staff grain handling location and 3 seasonal (harvest only) facilities. We ship corn by truck and rail.
Of all of the the proposed changes, my biggest concern is with the changes to the definition of bona fide hegding. In particular, anticipatory hedging of futures and futures spreads. Many hedging transactions employed for decades by the industry, and historically considered bona fide by the commission, would be outside the new proposed definition. These activities are very important to our industry and must be maintained as bona fide hedging. Thousands of U.S. agribusiness firms rely on many types of hedging transactions to manage risk appropriately in their daily business operations.
An examples of hedging strategies that could be at risk include spread trading. Futures trading that locks in carrying charges prior to receiving grain or in managing "Price Later" strategies offered to producers. Also this activity helps manage spread risk.and the ability to carry grain inventories. Another Bona Fide hedging strategy at risk is Pre-hedging purchases of producer grain outside trading hours of a futures exchange.
The CFTC-proposed rule unnecessarily and dramatically narrows the range of hedging transactions that would be considered bona fide hedges.
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