" . secretary 

From: 

Sent: 

To: 

Subject: 

wroenigk@chickenusa.org 

Friday, January 18, 2008 4:33 PM 

secretary 

Public Comment Form 

COMMENT ·~ 

Below i.s the result of your feedback form. It was submitted by ReceiVed CFTC 

-~:=~=~~:~==~~=~=~~=:~~=:~-~~-~=~~::~-~:~~:=:-=~~-~~~~-:~-=~~=~~=~----~~CN1 

commenter subject: Proposed Revisions of Fed. Speculative Position 

Limits 

commenter frdate: December 31, 2007 

commenter frpage: 74213 

commenter comments: 

January 17, 2008 

Mr. David Stawick, Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

Re: Proposed Revision of Federal Speculative 

Position Limits 

Dear Mr. Stawick, 

On behalf of the National Chicken Council (NCC), 

which represents companies that produce/process 

about 95 percent of the chickens in the United 

States, I thank you for the opportunity to present 

comments on the proposed revision of Federal 

speculative position limits for agricultural 

commodities. NCC poultry company members represent 

some of the country s largest corn and soybean meal 

end-users. NCC, therefore, believes that it is 

imperative that the financial markets reflect the 

fundamentals of the supply and demand for the grain 

markets. However, based on the current market 

environment and the existing money flows into 

different commodities, allowing these increased 

limits will further encourage monies to flow into 

these commodities. This will cause increased 

distorted price action and an increase in 

unwarranted volatility for end-users. Our members 

do not want nor need such volatility. 

We are disturbed by the size of the proposed change 

in the Federal speculative position limits. With 

corn trading over $5 a bushel, soy meal hovering 

around $350 a ton and old crop wheat at a sustained 

price above $9, there already exists significant 

open interest as well as trading liquidity. In 

1 

--;J 

.:-) ~-~~ ·-.~l c·r~l 

f,._,.,._ 

'\ ..._ ...... 

'::·');~ 
fact, perhaps the primary reason for the proposal 

to increase the speculative limits is to attract 

monies that are flowing into the over-the-counter 

market (over which NCC believes the CFTC has 

inadequate oversight) to the exchange . 

NCC does not support the proposed revision of the 

Federal speculative position limits because NCC 

feels that ample opportunities exist for 

speculators to participate in these commodity 

markets. As it is, price distortions exist in the 

market that the CFTC has not addressed . Because 

of the heightened interest in commodities as an 

investment vehicle, the expected convergence 

between the physical and futures is not occurring. 

The futures prices relative to the physical 

contract are not accurately reflecting the 

cash-market carrying charges one of the reasons 

to have this derivative instrument. End-users hedge 

their exposures using the financial markets based 

on the implicit assumption that the payoff profile 

between the physical and financial does not 

breakdown and they are positively correlated. 

That does not exist today across all these grain 

markets. If we do not have convergence between the 

futures and the physical markets, what is the 

business function for the financial market ? 

Without convergence, the futures markets primary 

purpose will be as a speculative instrument. By 

increasing the speculator s ability to trade, the 

CFTC will exacerbate the current distorted 

relationship between the financial and physical. 

In addition, NCC does not support providing an 

exemption for index funds and classifying them as 

hedgers because they are not. What underlying 

business are they hedging? They are pure profit 

mechanisms for the investor to participate in the 

potential upward or downward price volatility of 

the commodity sector. Eliminating limits on index 

funds will allow these investment vehicles to 

overwhelm the volume traded daily in these markets. 

NCC will address this issue further in another 

letter to CFTC. 

The combined impact of increasing limits for the 

speculator and exempting the index funds from 

speculative limits would cause increased price 

volatility from which only the exchanges themselves 

will benefit. The ability of end-users to reduce 

the earnings volatility in their business will be 

further impaired. 

In sum, the proposal to increase speculative limits 

requested by the CFTC is not beneficial to the end 

user community. NCC does not support this proposal. 

Again, NCC appreciates the opportunity to share 

comments that should be helpful to your 

deliberations on this issue. If you have further 

comments, please feel free to contact me. 

Respectfully submitted, 

2 
William P. Roenigk 

National Chicken Council 

1015 15th Street, NW, Suite 930 

Washington, DC 20005 

202-296-2622 

wroenigk@chickenusa.org 

commenter name: William P. Roenigk 

commenter firm: National Chicken Council 

commenter address1: 1015 15th Street, NW, Suite 930 

commenter_city: Washington 

commenter state: DC 

commenter_zip: 20005 

commenter fax: 202-293-4005 

commenter_phone: 202-296-2622 

3