Comment Text:
TMA is a group of country elevators in central Kansas who rely on an efficient futures market with possible convergence. Convergence is the backbone of the markets and gives confidence to traders and creates liquidity to the markets.
I attended a meeting in KC sponsored by KSU and CFTC earlier this year. One of the main topics of conversation was convergence. My take away was everyone felt the importance and there were many views on how to fix it.
Problems with lack of convergence need to be fixed in a reasonable time period. VSR is the fastest to react but adds much variability to spreads. As a country elevator system only in the US we do not have an international arm to offset risk when there is lack of convergence. TMA is owned by elevators in a cooperative system who are directly owned by Producers. These Producers are protected by crop insurance which when markets do not converge are penalized since crop insurance is based on futures prices.
In listening to both sides of the conversation on how to fix convergences issue I believe we will never make everyone happy. VSR is to extreme for some and I believe a fixed change and waiting on governing bodies to fix/change is to slow. The hybrid with a yearly observation period and change based off of VSR measures currently in place for wheat look like a good solution.
