Received CFTC 

Records Section 

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Mr. David Stawick, Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 2181 Street, NW 

Washington, DC 20581 

o. I o I' U 

January 28, 2008 

COMMENT 

Re: Proposed Risk Management Exemption from Federal Speculative Position Limits 

Dear Mr. Secretary, 

Thank you for the opportunity to present comments on the proposal to exempt "risk 

management" positions from Federal speculative position limits. As one of the nation's 

largest corn and soybean meal end users, we rely heavily on the exchange traded markets 

to represent and reflect fair value and we feel this issue is of great importance. 

Cash buyers and sellers have been exempt from the position limits, as their positions 

could easily be tied to cash exposures. There was a natural, self-limiting control in place 

that logically no single entity could become large enough (limited by cash flow, physical 

storage space, or actual demand) to control enough volume to add undue volatility. By 

exempting the index funds from speculative limits, thereby allowing for virtually 

unlimited positions, the natural limitations will no longer be in place. With current and 

growing money flows, it will be easy for index funds, singularly or as a whole, to control 

positions equal to or larger than physical annual crop sizes. 

We feel that allowing the proposed changes would be clearly contrary to Section 4a of 

the Commodity Exchange Act, 7 U.S.C 6a which states: 

Excessive speculation in any commodity under contracts of sale of such 

commodity for foture delivery made on or subject to the rules of contract markets or 

derivatives transactions execution facilities causing sudden or unreasonable fluctuations 

or unwarranted changes in the prices of such commodity, is an undue and unnecessary 

burden on interstate commerce in such commodity. 

We believe that the excessive speculation that will occur and the resulting price volatility 

from the index funds' activities will have a direct impact on the end-users' and 

producers' ability to properly plan, budget and respond to price signals. The producer 

may interpret a sell-off in prices as a signal that less production is needed, when in fact, 

the sell-off had more to do with the index fund owners' desire to exit the broadly 

diversified fund (heavily energy related) because they no longer desired a position in the 

Pilgrim's Pride Corporation 

World Headquarters Park 

4845 US Highway 271 North 

Pittsburg, Texas 75686-0093 

903434-1000 

Web: www.pilgrimspride.com 

• 
energy market. With the creation of and further growth in index funds, there is a great 

chance that there will exist un-natural commodity price correlations. 

An historic (monthly) correlation of com and crude oil is .29- not very well correlated. 

A more recent (daily) correlation of com and crude oil is .585- nearly twice as 

correlated. The argument can be made about ethanol's involvement; however the price 

correlation between ethanol and crude oil is only .22 on a similar daily - nearby basis. 

Crude oil should reflect on com prices as it relates to cost of production and 

transportation; but when nearly 60% of the com price can be defmed by the change in the 

price of Crude oil, then one has to wonder if the volume of the current funds are already 

having an impact. 

Once allowed, and limitless, one can only wonder how the grain markets will react when 

crude oil rallies for multiple days or crashes for multiple days. We should not force 

relationships in commodities that do not have natural price relationships. All 

commodities have not historically moved in concert; however, when they did, it was 

because the markets were telling the participants that bigger issues were at stake, i.e. 

inflation, deflation, recession, etc. We need that barometer to remain intact in the market. 

We oppose the proposed changes, as we do not see these as benefits to end users or 

producers. We feel strongly that the index funds should be treated as a speculator, and 

exist within the margin requirements established. The individual or fund buying this 

index is doing so on a speculative basis, as they are clearly betting that commodities, as a 

whole, will move higher. The creator of the index would not be required to have a risk 

management position if they had not created the tool for the speculator. When one 

follows the money flow, it is clear that it is still a speculative trade and it should, without 

question, be treated as such. 

Again, thank you for allowing us to share our comments. If you have further questions, 

feel free to contact me at edwin.carter@pilgrimspride.com or via phone at 903-434-1789. 

Sincerely, 

W. Edwin Carter 

Senior Vice-President Commodity Risk Management 

Pilgrim's Pride Corporation 

Pilgrim's Pride Corporation 

World Headquarters Park 

4845 US Highway 271 North 

Pittsburg, Texas 75686-0093 

903-434-1000 

Web: www.pi1grimspride.com