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AFR calls for action on wheat investigation findingsOklahoma As Oklahoma wheat producers begin putting a new crop in the ground over the next month, American Farmers & Ranchers a general farm organization and mutual insurance company, praised the investigative findings issued by a U.S. Senate committee which found excessive speculation in the wheat market hurting farmers. "We commend Senator Tom Coburn and his colleagues of the U.S. Senate Permanent Subcommittee on Investigations for their work to get to the bottom of why we have seen such a spread in recent years between futures prices and cash prices for wheat," said Terry Detrick, AFR President. "Such a span of disparity should not have existed in a marketplace intended to provide protection for risks. The process worked right the opposite. Farmers, grain elevators, processors and U.S. consumers experienced significant uncalled for costs and price risks." Detrick called on the Commodity Futures Trading Commission to take heed to the findings issued by the Senate Committee and continue to rein in commodity index traders and restrict excessive speculation that have disrupted commodity prices. While acknowledging that speculation must occur for the market to function, Detrick said speculation should have some limits and be closely monitored. "Battling nature is difficult in agriculture and to a large degree there is nothing we can do about this. But this is something that regulators can address. Speculative money flooded the marketplace and federal regulators failed to take action to protect the real market forces," explained Detrick. Since the initial release of the report and within the last month the CFTC has taken initial steps to tighten controls on some traders. The Senate investigation found that unwarranted price changes created burdens on farmers, agribusinesses and others by making it difficult to use the futures market to protect against price changes and by causing significant unanticipated costs. Those costs created higher margin calls due to higher futures prices; failed hedges; and disruption of normal pricing patterns and relationships. The federal Commodity Exchange Act requires the CFTC, the primary commodity regulator, to prevent excessive speculation by placing position limits on commodity traders. In the wheat market, CFTC usually restricted traders to no more than 6,500 wheat contracts at a time but instead allowed some commodity index traders to hold up to 10,000, 26,000 and even 53,000 contracts at one time.
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