Comment Text:
We are a grain merchandising company that buy, sells and transports physical grains, oilseeds, fertilizers and by-products of grain and oilseed processing. I wish to convey the following points with respect to bona fide hedges and speculative limits rule-making that the CFTC has asked for comments on.
Our company relies on many types of hedging transactions to manage risk appropriately in our daily business operations. The CFTC-proposed rule unnecessarily and dramatically narrows the range of hedging transactions that would be considered bona fide hedges. Many hedging transactions employed by our company for decades that were considered bona fide by the commission would be outside the new proposed definition.
In particular, pre-purchase 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.
-Pre-setting futures carrying charges to manage spread risk. We need to lock in market structures in the spreads in order to profitably carry grain to a later time-frame.
Restricting the use of long-accepted strategies will increase costs of hedging for business risk management and ultimatley lead to lower bids to producers and higher consumer prices.
Thank you for the opportunity to comment on this important regulatory matter.
Thank You,
Mike Grothe
Geneva Milling Co., Inc.
Geneva, NE
