Comment Text:
Cogdill Farm Supply, Inc. has served local grain producers and livestock feed consumers for nearly 36 years. During the first 31 years of operation our business tended to avoid use of grain futures contracts and chose instead to manage price risk solely via cash contracts with counterparties (e.g. larger grain elevators or processors). In the past five years, however, we have benefitted tremendously by broadly utilizing (grain) futures contracts and options to hedge our price risk exposure. Relative to operation within strictly cash markets and/or direct agreements, commodity futures offer tremendous advantages to our business, particularly for our ability to quickly establish hedges against grain purchases, pre-hedge anticipated price risks, and to manage our term risks via spreads.
The currently-proposed rules being considered by the CFTC with respect to bona fide hedges will definitely adversely affect our business and reduce the utility of futures contracts for our hedging purposes. Implementation of these rules will tend to push participants such as our toward private arrangements and cash contracts with end-users to manage our risks. Ultimately, these rules will reduce the efficiency of business such as ours leading to wider bid spreads for our grain producers, and higher costs for the end-users we serve.
