Christa Lachenmayr, Division of Market Oversight

December 9, 2014

Deliverable Supply 

Agricultural Commodities

U.S. COMMODITY FUTURES TRADING COMMISSION

AGRICULTURAL ADVISORY COMMITTEE
Deliverable Supply

“The Commission believes that, to meet the statutory 

requirement of tending to prevent or to diminish price 

manipulation, market congestion, or the abnormal 

movement of a commodity in interstate commerce, a 

futures contract should have a deliverable supply that, 

for all delivery months on the contract, is sufficiently large 

and available to market participants that futures deliveries, 

or the credible threat thereof, can assure an appropriate 

convergence of cash and futures prices.”

- CFTC Federal Register Notice, November 13, 1997

(emphasis added)

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Significance

• Most short futures positions do not result in physical delivery of 

the commodity, but the credible threat of delivery drives 

convergence between cash and futures prices (arbitrage). 

• When determining whether DCMs are compliant with Core 

Principle 3, Appendix C to Part 38 notes: “[t]he specified terms 

and conditions, considered as a whole, should result in a 

“deliverable supply” that is sufficient to ensure that the contract 

is not susceptible to price manipulation or distortion.”

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Guidance

• Appendix C to Part 38 states that in general, deliverable supply 

defined as the quantity of the commodity that potentially could 

be made available for sale on a spot basis at current prices at 

the contract's delivery points. 

• Qualifiers:

• meets the contract's delivery specifications; 

• reasonably can be expected to be readily available to short traders and 

salable by long traders; 

• at its market value; 

• in normal cash marketing channels; 

• at the contract's delivery points; 

• during the specified delivery period; and 

• barring abnormal movement in interstate commerce.

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Guidance 

• Exclusions

• Quantities of the commodity that would not economically obtainable or 

deliverable at prevailing price levels (i.e., supplies that are “out of 

position”)

• Amount of commodity “committed for long-term agreements” of 

deliverable supply (acknowledges information about long-term 

agreements may not be publicly available) 

• Longstanding Commission policy that spot month speculative 

position limits – for physical delivery and cash-settled futures 

contracts – are appropriately set based on deliverable supplies.

• While fairly detailed, the guidance does not provide any 

commodity-specific information. 

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Supplemental Information
Position Limits

• 19 agricultural commodities identified in the proposed rule:

* denotes federal legacy limit. See Position Limits for Derivatives 78 FR 75725.

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MGE

Wheat*

CBOT

Corn*

Oats*

Rough Rice

Soybeans*

Soybean 

Meal

Soybean 

Oil

Wheat*

KCBOT 

Wheat*

CME

Class III 

Milk

Feeder 

Cattle

Lean Hogs

Live Cattle

ICE US

Coffee “C”

Cocoa

Cotton*

FCOJ

Sugar 11

Sugar 16
Position Limits

• Proposed rule sets initial spot month position limits at the 

current DCM-set or federal legacy limit levels for the core 

referenced futures contracts (and associated referenced contracts 

and swaps) for a period of two years after the rule becomes 

effective. 

• Rule stipulates that position limit levels shall be reset on at least

a biennial basis, at which time DCMs listing core referenced 

contracts will be required to submit deliverable supply 

estimates, accompanied by a methodology description and 

supporting data. 

(See Position Limits for Derivatives 78 FR 75727)

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Position Limits

• Alternative 1: Base initial spot month limits on estimated 

deliverable supplies submitted by CME Group (July 1, 2013). 

Under this alternative, the Commission would use the 

exchange’s estimated deliverable supplies and apply “the 25 

percent formula” in a final rule pending verification that the 

CME’s estimated deliverable supplies are reasonable. 

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Exchange Ag Commodity Current Implied % Increase

KCBOT Wheat* 600 4100 583%

CBOT Wheat* 600 3700 517%

CBOT Corn* 600 1000 67%

CBOT Oats* 600 1500 150%

CBOT Soybeans* 600 1200 100%

CBOT Soybean Oil* 540 5300 881%

CBOT Soybean Meal* 720 4400 511%

CBOT Rough Rice 600 1800 200%

CME Class III Milk 1500 5300 253%

Footnote 206 states that CME did not propose to set the level of spot month limits using the 25 percent 

formula in its letter. See Position Limits for Derivatives 78 FR 75727.
Position Limits

• Alternative 2: If the Commission was not able to verify that an 

exchange’s estimated deliverable supply was “reasonable” in a 

particular commodity, the rule would apply the current limits, or 

a higher level based on a Commission estimate of deliverable 

supply for such commodity, but not greater than would result 

from the exchange’s estimated deliverable supply. 

• Alternative 3: Permits the Commission, in its discretion, to set 

an initial spot month limit and subsequent levels, at 

• A DCM-recommended level; 

• A level corresponding to (not greater than) 25 percent of estimated 

deliverable supply; or 

• The current levels. 

(See Position Limits for Derivatives 78 FR 75728)

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Public Record

• December 26, 1996: Commission published notice, and 

requested public comment on, notification to CBT that it had 75 

days to amend delivery specifications on its corn and soybean 

futures contracts. See 61 FR 67998.

• New Crop: Emphasized level of deliverable supplies available for the new crop 

futures contract month are the most critical in deterring manipulation and 

promoting convergence. Discussed at length whether, on an annual basis, the 

amount of commodity left over from the previous year (“old crop”), combined 

with the amount of newly harvested commodity (“new crop”) would be sufficient 

to ensure an adequate deliverable supply for the New Crop futures contract month. 

• Locational Differentials: Determined that the inclusion of a delivery territory, in 

and of itself, was insufficient to increase deliverable supplies. Locational 

differentials must be assessed to delivery territories and set at levels that make that 

territory “economic” for delivery.

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Public Record

• Diversion of supplies for domestic processing considered an abnormal 

movement in interstate commerce; confined calculation to commodity in 

export channels. 

• Declined to include deliverable supplies that would be made available in 

response to price increases in the futures markets (for the same reason). 

• Pointed out that capacity of firms in the delivery territory should not be 

construed as an indicator of adequacy of deliverable supplies 

• Suggested that general information about production and commercial 

activities in the vicinity of the delivery territories was insufficient and 

resulted in a comingling of supplies destined for domestic processing and 

the export market. 

• Included data only from firms meeting regularity requirements.

• Declined to include through-put facilities (warehouse receipts)

(See 62 FR 60831)

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Public Record

• The Commission offered a deliverable supply calculation (for the 

Illinois River) 

• Sum of barge shipments from the proposed delivery points for a contract 

delivery month and all subsequent months of the same crop year with some 

downward adjustment for the final delivery month of the crop year (when 

barge shipments typically include supplies from the new and old crop years). 

• For Chicago, the deliverable supply was calculated as the sum of stocks 

available at warehouses meeting the net worth requirements in the delivery 

territory at the beginning of each delivery month plus the number of 

warehouse receipts issued during that month, and adjusted by each firm’s 

ability to issue receipts (according to their capacity and daily loading rate). 

• Reiterated that the estimates were just a starting point that could be revised 

further downward to reflect decreases in supplies due to natural and manmade 

phenomena (weather-related disruption of river traffic, supplies committed via 

long-term agreements, delivery territories that are temporarily uneconomic, 

etc).

(See 62 FR 60831)

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Links

• Commission Guidance:

• Apppendix C to Part 38: http://www.ecfr.gov/cgi-bin/textidx?SID=c01ba9a00172f492251347d0cd5e0d57&node=ap17.1.38_11201

.c&rgn=div9

• Federal Register Notices:

• 61 FR 67998, 12/26/1996: http://www.gpo.gov/fdsys/pkg/FR-1996-12-

26/pdf/96-32708.pdf

• 62 FR 60831, 11/13/1997: http://www.gpo.gov/fdsys/pkg/FR-1997-11-

13/pdf/97-29895.pdf

• 63 FR 26575, 05/13/1998: http://www.gpo.gov/fdsys/pkg/FR-1998-05-

13/pdf/98-12664.pdf

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