Received CFTC 

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AM ERIC AN FEED I N DUST R Y ASS ci~ lA i:i; d:.J I 

January 29, 2008 

Mr. David Stawick 

Secretary 

Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington; DC 20581 

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COMMENT 

Re: Risk Management Exemption From Federal Speculative Position Limits. 

Dear Mr. Stawick: 

I write to provide you with the American Feed Industry Association's (AFIA) position 

regarding the Commodity Futures Trading Commission (CFTC) proposal to allow certain 

types of funds a Risk Management Exemption From Federal Speculative Position Limits. 

AFIA is one of the nation's foremost agribusiness associations, devoted exclusively to 

representing the business, legislative, regulatory advocacy and educational needs of the 

animal feed industry and its suppliers. AFIA membership includes 560 domestic and 

international companies, as well as state, national and regional agribusiness associations. 

Member firms include feed and pet food manufacturers, livestock and poultry integrators, 

animal health companies, ingredient suppliers, equipment manufacturers and companies 

which supply other products, services and supplies to feed manufacturers. AFIA 

members represent over 70% of the commercial feed and pet food manufactured in the 

United States each year. 

The feed industry makes a critical and significant contribution to food safety, nutrition 

and the environment. Given feed represents approximately 70% of the on-farm cost of 

raising livestock and poultry, our industry plays a critical role in the safe and affordable 

production of meat, milk and eggs. 

The U.S. feed industry is the single largest purchaser and user of com and soybeans, as 

well as their processed meals and byproducts. It is critical the grain, oilseed and 

ingredient commodity markets accurately reflect true supply and demand situations for 

these commodities. 

Allowing certain types of positions held by funds to. be classified as risk management 

positions will only encourage more speculation to occur in these commodities. The result 

of this will be increased volatility and further distortion of the relationship between the 

financial and physical markets for the end users that depend on these markets for business 

risk management. 

2101 Wilson Blvd., Suite 916, Arlington, VA 22201 

Tel.: 703/524-0810 FAX: 703/524-1921 E-mail: afia@afia.org www.afia.org 

I 

. 
~FI~ AMERIC'AN FEED INDUSTRY ASSOCIATION 

It is important to note that while these funds may be hedging the invested capital, the 

initial investments are speculative and thus this exemption should not be allowed. 

There is a large speculative interest in agricultural commodity futures markets today. In 

some crops, the trading on a daily basis almost meets the entire U.S. crop volume, which 

significantly adds to the price volatility. This effects both the price and hedging 

effectiveness of these commodity markets. The initial intent of these agricultural 

commodity futures markets was to provide an effective risk management tool for 

producers and buyers of grains and oilseeds, which benefits both producers and 

consumers. This proposal will further distort these markets and their effectiveness as a 

risk management tool. 

As a result of the higher capital costs required as a result of the increased volatility, 

several end-user firms are reducing their use of these markets. This defeats the 

fundamental purpose ofthese futures markets. 

Based on the above stated reasons, APIA opposes the Commission's recommendation to 

allow certain types of funds a Risk Management Exemption from Federal Speculative 

Position Limits. This proposal will result in increased volatility and reduced ability for 

the feed and livestock processing industry to effectively manage business risk. The 

agriculture markets were established to provide an efficient, price discovery mechanism 

and a hedging/risk control vehicle for the grains and ingredients markets. These 

functions for the end-user must be preserved in any changes considered by the CFTC. 

APIA appreciates the opportunity to provide comments. Please do not hesitate to contact 

me if I can provide further information or you have questions regarding the feed 

industry's position on this recommendation. APIA looks forward to working with the 

Commission to ensure the markets remain an effective tool for the end-users. 

Respectfully submitted, 

t.,//}_~ 

G. Newman 

dent&CEO 

2101 Wilson Blvd., Suite 916, Arlington, VA 22201 

Tel.: 703/524-0810 FAX: 703/524-1921 E-mail: afia@afia.org www.afia.org