"Improve the .economic well-being of agriculture and enrich the quality of farm family life. " 

January 21, 2008 

Mr. David Stawick 

Secretary, Commodity Futures Trading Commission 

Three Lafayette Centre 

1155 21st Street, NW 

Washington, DC 20581 

RE: Revision of Federal Speculative Position Limits 

Dear Mr. Secretary: 

COMMENT 

-·,''! 

.. ,., .. 

) . 

c . 

..... -.· 

~~ j 

~--·· 

,. 

~~ --

This letter contains the position of the Illinois Farm Bureau (IFB) on the Commodity 

Futures Trading Commission (CFTC) proposal to increase federal speculative position 

limits, published November 21, 2007 in the Federal Register. 

The Illinois Farm Bureau is a grassroots producer organization currently representing 

over 70,000 farm families in Illinois. As such, we represent the interests of the majority 

of the farmers in Illinois. Throughout our history, we have continued to encourage our 

farmer members to utilize the risk management and marketing tools offered through the 

various commodity exchanges. 

We certainly appreciate the opportunity to provide comments to the CFTC on this very 

important matter. We feel a decision to once again increase speculative limits will 

definitely have a negative impact on the performance on the agricultural price discovery . 

system. During the past several years, we have witnessed an unprecedented disconnect 

between the futures price of grain and the actual cash price for grain throughout the 

processing pipeline. It is commonly believed that one of the largest factors in causing 

this disconnect and lack of convergence between futures and cash prices is the influence 

speculators already have on the futures market. 

Buyers and sellers of the physical commodity actually determine the value of the grain at 

each ofthe buying points along the pipeline. Extremely weak basis levels witnessed over 

the last two years indicate that speculators continue to overvalue the futures market to a 

large degree when compared to values traded by physical buyers and sellers of the actual 

commodity. 

ILLINOIS AGRICULTURAL AS SOCIA TIO~ 

1701 Towanda Avenue • P.O. Box 2901 • Bloomington, Illinois • 61702-2901 

Phone: 309.557.2111 • Fax: 309.557.2559 • www.ilfb.org 

[···-,.) 

:: :J . '•"' , .. ,.] 

C) 

'I' i 

~."'} ;~,:; 

l:.:J· 
Mr. David Stawick 

January 21, 2008 

Page2 

This rather large difference in prices can cause significant problems to agriculture as 

futures prices relate to land values, cash rents, input pricing, and other factors. The world 

has been conditioned and trained to use the CBOT values as indicators of commodity 

prices. Currently, these values do not correlate to what is going on in the real 

marketplace. 

During these times of increased market volatility and uncertainty, producers, who are 

already denied access to the delivery process, need improved risk management tools and 

access to such tools. It is our opinion that increasing speculative limits will serve only to 

increase the already large disconnect between cash and futures prices and will provide no 

additional risk management assistance to grain producers, grain buyers or processors. 

We fear that expanding the speculative limits once again will only serve to further 

aggravate the situation existing between futures and cash markets. We strongly urge the 

CFTC to refrain from expanding speculative limits and to continue to study the serious 

impact lack of convergence and hedging inefficiencies have on agriculture and rural 

America. We also encourage the CFTC to continue to participate in the study of 

alternative delivery mechanisms or cash settled systems that would potentially improve 

hedging efficiencies and better reflect the dramatic fundamental shifts occurring in 

American agriculture due to the massive increase in biofuels usage. 

We would also like to recommend the CFTC to reconsider the position it has taken with 

the hedge exemption for funds. We do not feel that providing hedge exemptions to funds 

is consistent with the original purpose and intent ofhedge exemptions nor does it bring 

about increased efficiencies to the agricultural futures markets. 

Thank you for your consideration. 

Sincerely, 

ILLINOIS FARM BUREAu® 

Philip 

~~ Nelson 

President