JAN-28-08 05:51PM FROM-National Chicken Counci I +202 293 4005 T-519 P.OOl/002 F-413 

January 28, 2008 

:i\!Ir. David Stawick 

Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 'Lf I ?'. SS l f 

NATIONAL CHICKEN COUNCIL 

1015 Fir1~:ENTH Srrit:ET NW, SurTE 9.30 

WAst·ur..:.:~ roN. oc 2ooos 

COMMENT 

• ~_..,_ ... ' 

PHON(;: 20?.·?96-202.2 

FAX: 202·283·'1005 

RE: Rjsk Management Exemption From Fedeml Speculative Position Limits 

Dear Mr. Secretary: 

The National Chicken Council (NCC), which represents companies that produce/process 

about 95 percent of the chicken in the United States, appreciates the opportunity to provide 

comments on the proposed rulemalcing to allow for certain types of funds Risk Management 

Exemption From. Federal Speculative Posirion Limits. Taken together, U.S. chicken 

companies are the largest com and soybean meal end-users in animal agriculmrc. It is 

critically important, therefore, that the financial markets reflect the fundamentals of the 

supply and demand for the grain and oilseed mm:kets. Based on the cunent money flows into 

agricultural commodities, NCC believes allowing certain types of positions held by funds to 

be classified as "risk management positions" will further encourage n_:1ore speculation to 

occur in these commodities. This, in turn, will cause increased distorted price action and a 

continued increase in unwarranted volatility for end-users like us. 

Regardless of the type of fund and its stated purpose, the original invested equity moving into 

funds is always invested as speculative money. That money moves into the hands of a fund, 

whether traded actively or passively, does not negate the fact that the original money and 

purpose for that money was speculative. 

There seems to be a virtual endless supplyof such speculative capital, and that capital 

already is dominating the agricultural futures markets today. There are agricultural markers 

where the entire U.S. crop is traded almost on a daily basis adding unnecessarily to volatility, 

which does significantly impact both pricing and hedging perfom1ance of markets. The 

ultimate vaJue of hedging is to allow grain and oil seeds to move from producers to ultimate 

consumption at a lower risk and maximum efficiency, thereby creating better retums for 

_producers and favorable prices for consumer~. Recent dramatic increases in volatility and 

growing investment by large, nontraditional market participants have dramatically raised the 

risk and cost of moving grain and oil seeds through the system. 

lf the CFfC allows for certain types of fund::. to be exempted from regulated speculative 

limits, the trading volume will continue to increase and significant daily price swings will be 

further encouraged. 

o?-1~ 

(j) 
JAN-28-08 05:51PM FROM-National Chicken Counci I +202 293 4005 T-519 P.002/D02 F-413 

In addition, be~ause of borrow·ing limitations. many companies -large and small- are 

significantly reducing bids, or eliminating bids altogether, on deferred grain purchases. If 

this trend continues, it defeats the fundamental purpose of futures coupled with the cash 

fo1ward exclusion to provide producers access ro deferred cash sales to manage price risks. 

2 

With these facts and situation in mind, NCC re{:onunends that CFTC not adopt the proposed 

rule change related to the hedge exemption for funds, with the understanding that agricultt1ral 

futures markets were established with an economic purpose to serve as efficient, central 

public pricing and hedging vehicles for grain and oilseeds. That purpose is not being 

fulfilled as well as it should be under today's conditions, and the current broadened definition 

of hedging to include cenain types of funds has contributed to this situation. 

This CFTC proposed rulemaking is not beneficial to the end user community, especial1y the 

U.S. chicken industry. Therefore, NCC does not support allowing for certain types of funds 

to be classified as risk managers. 

Sincerely, 

/J:I~r.~~ F 

William P. Roenigk l 

Senior Vice President