Trade Date
9/14/07
9/17/07
9/18/07
9/19/07
9/20/07
9/21/07
9/24/07
9/25/07
9/26/07
9/27/07
10/2/07
10/4/07
10/8/07
10/10/07
10/11/07
10/12/07
10/15/07
10/16/07
10/17/07
10/18/07
10/19/07
10/22/07
10/23/07
10/24/07
10/25/07
10/26/07
10/29/07
10/30/07
10/31/07

11/1/07

11/2/07

11/5/07

11/6/07

11/7/07

11/8/07

11/9/07
11/12/07
11/13/07
11/14/07
11/15/07
11/16/07
11/19/07
11/20/07
11/21/07
11/23/07
11/26/07
11/27/07
11/28/07

Bales
564
1,109
9,598
5,255
5,785
370
2,872
1,734
1,738
2,984
5,750
440
2,974
1,969
5,651
5,378
3,825
16,604
16,555
15,334
4,388
910
3,370
111
4,000
3,634
176
1,217
8,162
1,746
3,944
2,780
5,132
1,463
776
1,499
5,118
1,642
6,388
51
1,016
61
4,427
5,492
3,493
4,436
22,877
570

Average Price Nearby Futures

0.6032
0.6009
0.5825
0.5729
0.5789
0.5944
0.5507
0.5805
0.5738
0.5966
0.5848
0.6050
0.5993
0.5586
0.5735
0.5684
0.5644
0.5828
0.5578
0.5775
0.6042
0.5546
0.5957
0.5950
0.5954
0.6111
0.6022
0.5945
0.5596
0.5612
0.5745
0.5694
0.6189
0.5908
0.5807
0.6143
0.6084
0.5853
0.6120
0.5315
0.5715
0.4774
0.5325
0.5680
0.5736
0.6018
0.5951
0.5868

0.6102
0.6143
0.6155
0.6289
0.6154
0.6334
0.6390
0.7240
0.7217
0.7259
0.6347
0.6346
0.6246
0.6380
0.6382
0.6407
0.6368
0.6342
0.6354
0.6477
0.6532
0.6487
0.6514
0.6425
0.6444
0.6488
0.6475
0.6409
0.6407
0.6366
0.6437
0.6394
0.6492
0.6555
0.6489
0.6445
0.6337
0.6322
0.6324
0.6184
0.6631
0.6588
0.6546
0.6579
0.6560
0.6494
0.6444
0.6571

Basis

(0.0070)
(0.0134)
(0.0330)
(0.0560)
(0.0365)
(0.0390)
(0.0883)
(0.1435)
(0.1479)
(0.1293)
(0.0499)
(0.0296)
(0.0253)
(0.0794)
(0.0647)
(0.0723)
(0.0724)
(0.0514)
(0.0776)
(0.0702)
(0.0490)
(0.0941)
(0.0557)
(0.0475)
(0.0490)
(0.0377)
(0.0453)
(0.0464)
(0.0811)
(0.0754)
(0.0692)
(0.0700)
(0.0303)
(0.0647)
(0.0682)
(0.0302)
(0.0253)
(0.0469)
(0.0204)
(0.0869)
(0.0916)
(0.1814)
(0.1221)
(0.0899)
(0.0824)
(0.0476)
(0.0493)
(0.0703)

B2B

61.02
61.43
61.55
62.89
61.54
63.34

63.9

72.4
72.17
72.59
63.47
63.46
62.46

63.8
63.82
64.07
63.68
63.42
63.54
64.77
65.32
64.87
65.14
64.25
64.44
64.88
64.75
64.09
64.07
63.66
64.37
63.94
64.92
65.55
64.89
64.45
63.37
63.22
63.24
61.84
66.31
65.88
65.46
65.79

65.6
64.94
64.44
65.71

(70.00)
(134.00)
(330.00)
(560.00)
(365.00)
(390.00)
(883.00)

(1,435.00)
(1,479.00)
(4,293.00)
(499.00)
(296.00)
(253.00)
(794.00)
(647.00)
(723.00)
(724.00)
(514.00)
(776.00)
(702.00)
(490.00)
(941.00)
(557.00)
(475.00)
(490.00)
(377.00)
(453.00)
(464.00)
(811.00)
(754.00)
(692.00)
(700.00)
(303.00)
(647.00)
(682.00)
(302.00)
(253.00)
(469.00)
(204.00)
(869.00)
(916.00)
(1,814.00)
(1,221.00)
(899.00)
(824.00)
(476.00)
(493.00)
(703.00)


vehicles to attract a flow of investment funds and not for price discovery and risk transfer.
Although some may desire this, the Act is straightforward as to the purposes for which the
markets are to be regulated.

Recommendations

On behalf of the members of Amcot, we respectfully urge the Commission to implement
or publicly respond to as many of the following recommendations as possible by June 1, 2008:

(1) Redesign the weekly CFTC position of traders report so that “Commercial” accounts be
divided into two categories — hedgers involved as a commercial enterprise in the
production, distribution, or consumption of the physical agricultural commodity, and
hedgers not so involved.

(2) Require that any part of the position of an index fund with a hedge exemption that
exceeds the dollar allocation or the percentage of funds allocated to that commodity as
defined in its prospectus and recorded with the CFTC be subject to speculative position
limits, speculative margin, and be reported weekly to the CFTC.

(3) Require that contract markets recognize at least three classes of traders; hedgers involved
as a commercial enterprise in the production, distribution, or consumption of the physical
agricultural commodity, other hedgers, and speculators. Initial margin required should be
mandated so that “commercial enterprise” hedgers have the lowest, other hedgers next,
and speculators the highest. The spread of initial margin between “commercial
enterprise” hedgers and speculators must be significantly greater than the current spread
between hedgers and speculators.

(4) Analyze what regulatory changes are necessary in order to restore a balance in
agricultural contract markets between the positions of hedgers involved in production,
distribution, or consumption and all other categories of traders that will make these
markets meet the requirements of the Act as quoted above. This would include, but not
be limited to,

(a) Establish the maximum size of speculative limits that can be approved for a
particular market on a market by market basis, and not on a “one size fits all”
basis. This should result in a decrease in CFTC allowed maximum position limits
for smaller contract markets.

(b) Requiring market participants to report to the CFTC weekly the positions held in
the contract market that are offsetting swap and OTC contracts, so that the CFTC
can have that information available to monitor possible price disruptive behavior.

(c) Require that daily trading range limits be established in agricultural contract
markets for futures and options on futures.

(5) Require that contract markets that are organized on a for profit basis contract with an
independent third party to provide their market surveillance function and that all copies
of this independent third party’s reports be forwarded to at least two public members of
the contract market’s Board.

(6) Investigate the events in the cotton futures market of February 20 — March 20, which in
the opinion of this writer constituted an undue burden on interstate commerce under the
Act, to determine what caused the unreasonable fluctuations and unwarranted changes in
price. Since the board and management of the contract market and the Commission are
statutorily bound to prevent such trading, such an investigation is necessary so that
appropriate safeguards can be developed to prevent its repetition in this or some other
contact market.


Trade Date

10/19/07
10/22/07
10/23/07
10/24/07
10/25/07
10/26/07
10/29/07
10/30/07
10/31/07

11/1/07

11/2/07

11/5/07

11/6/07

11/7/07

11/8/07

11/9/07
11/12/07
11/13/07
11/14/07
11/15/07
14/16/07
11/19/07
11/20/07
11/21/07
11/23/07
11/26/07
11/27/07
11/28/07
11/29/07
11/30/07

12/3/07

12/4/07

12/5/07

12/6/07

12/7/07
12/10/07
12/11/07
12/12/07
12/13/07
12/14/07
12/17/07
12/18/07
12/19/07
12/20/07
12/21/07
12/24/07
12/26/07
12/27/07

Bales
3,477
1,443
5,399
1,880
2,524
3,659
3,243
1,233
5,951
4,172
9,568
5,268

20,877
6,922
8,392
4,500
2,320
3,054
4,065

863
2,437
2,253
1,874
2411

935
3,792
2,232

10,334

2,121

782
3,561
6,724
8,303
8,923
9,476

10,616
6,607

26,216
6,959

26,500

15,612
8,078

27,945
9,160
8,883
2,013

19,422

37,402

Average Price Nearby Futures

0.5713
0.5872
0.5970
0.5555
0.6018
0.5759
0.6129
0.5738
0.5936
0.5995
0.6122
0.6043
0.6126
0.6094
0.6012
0.6050
0.5957
0.6013
0.6047
0.5949
0.5826
0.5642
0.5959
0.5902
0.5968
0.5903
0.5516
0.5863
0.5959
0.5549
0.5853
0.6069
0.6141
0.6086
0.5862
0.5842
0.5911
0.5970
0.5955
0.5979
0.5935
0.5885
0.5994
0.6005
0.6060
0.5915
0.6059
0.6110

0.6531
0.6479
0.6510
0.6449
0.6447
0.6488
0.6484
0.6416
0.6409
0.6372
0.6425
0.6400
0.6507
0.6537
0.6506
0.6471
0.6330
0.6323
0.6333
0.6216
0.6620
0.6587
0.6560
0.6573
0.6560
0.6523
0.6454
0.6573
0.6534
0.6440
0.6362
0.6370
0.6358
0.6355
0.6444
0.6483
0.6432
0.6511
0.6485
0.6561
0.6584
0.6566
0.6626
0.6639
0.6649
0.6665
0.6701
0.6760

Basis

(0.0818)
(0.0607)
(0.0540)
(0.0894)
(0.0429)
(0.0729)
(0.0355)
(0.0678)
(0.0473)
(0.0377)
(0.0303)
(0.0357)
(0.0381)
(0.0443)
(0.0494)
(0.0421)
(0.0373)
(0.0310)
(0.0286)
(0.0267)
(0.0794)
(0.0945)
(0.0601)
(0.0671)
(0.0592)
(0.0620)
(0.0938)
(0.0710)
(0.0575)
(0.0891)
(0.0509)
(0.0301)
(0.0217)
(0.0269)
(0.0582)
(0.0641)
(0.0521)
(0.0541)
(0.0530)
(0.0582)
(0.0649)
(0.0681)
(0.0632)
(0.0634)
(0.0589)
(0.0750)
(0.0642)
(0.0650)

G2B

65.31
64.79
65.1
64.49
64.47
64,88
64,84
64.16
64.09
63.72
64.25
64
65.07
65.37
65.06
64.71
63.3
63.23
63.33
62.16
66.2
65.87
65.6
65.73
65.6
65.23
64.54
65.73
65.34
64.4
63.62
63.7
63.58
63.55
64.44
64.83
64.32
65.11
64.85
65.61
65.84
65.66
66.26
66.39
66.49
66.65
67.01
67.6

(818.00)
(607.00)
(540.00)
(894.00)
(429.00)
(729.00)
(355.00)
(678.00)
(473.00)
(377.00)
(303.00)
(357.00)
(381.00)
(443.00)
(494.00)
(421.00)
(373.00)
(310.00)
(286.00)
(267.00)
(794.00)
(945.00)
(601.00)
(671.00)
(592.00)
(620.00)
(938.00)
(710.00)
(575.00)
(891.00)
(509.00)
(301.00)
(217.00)
(269.00)
(582.00)
(641.00)
(521.00)
(541.00)
(530.00)
(582.00)
(649.00)
(681.00)
(632.00)
(634.00)
(589.00)
(750.00)
(642.00)
(650.00)


Grower to Buyer Sales

Basis

8
3
5
2
>
g
$
3
z

150
(200)

(550)

2
o
3

ba
8

2
2
8

(900)

(1,250)

0
eS
8

2
ra
e

(1,600)
(1,950)
(2.300)

(2.650)

2
s
&

65.5

60.5

55.5

(3,000)

50.5

BOOz/PLib |

BO0Z/L/P
ROOZ/LEE
BO0Z/PZ/E
BOOZ/LLIE
BO0Z/OL/E
s00z/e/e
g00z/sz/e
B00z/8 Le
00z/L 2
B00Z/PIZ
Bo0z/ez/t
Booz/tz/t
BO0Z/r L/L
B00Z/L/t
4007/18/21
L00Z/rz/z1
LOOZILLZE
L00z/0Let
Loozieres
200/9Z/tb
2O0Z/6L/14
200z/21/b 4
L00z/5/44
2002/62/01
2002/2z/01
LO0Z/SL/OL
2002/8/04
200z/1/01
2002/P2/6
LO0Z/L1/6
L00Z/01/6
2002/6/6
L00z/Lz/8
4002/02/8
L00z/E1/8
2002/9/8
LOOZ/OEIL
LOOZ/EZ/L
L00Zz/OLIL
002/6/2
L002/2/L

Bales
60,000

50,000

40.000

30,000

10,000



fo= 7530
H= 7895
= 7325
L= 73564
[A= - 169

i
i \

Fr
F fife
|i i" 5, ; | lh
[ ly M of by,
; p \
L le a
16 Apr 08
iO= 7530
He 7895,
IL= 7325)
C= 7354) ‘Au Se Oct Nov Dec 2008
Tilieleslo2 716) Taleo]e7To4 ayorfoslis|22 101 |i2 ]10l17 for |14[22 for |11

CTA - Cotton (Combined), Dally Continuation

* ala ‘i

Source! CQG, Inc, © 2008 All rights reserved worldwide. www.eqg.com

Wednesday, April 16, 2008 04:46PM (Ver: 7.6850.0)

i 5
0 Tea tor 114

l25|oaTt 4

9000

A750

8500

7000

6750

6500

6250.

6000

5750

5500

5250


Trade Date Bales Average Price Nearby Futures

7/2/07
7/3/07
7/5/07
7/6/07
7/9/07
7/10/07
7/11/07
7/12/07
7/13/07
7/16/07
7/18/07
7/23/07
7/31/07
8/3/07
8/16/07
8/23/07
8/24/07
8/28/07
8/29/07
8/30/07
8/31/07
9/4/07
9/5/07
9/6/07
9/7/07
9/10/07
9/11/07
9/12/07
9/13/07
9/14/07
9/17/07
9/18/07
9/19/07
9/20/07
9/21/07
9/24/07
9/25/07
9/26/07
9/27/07
10/5/07
10/8/07
10/10/07
10/11/07
10/12/07
10/15/07
10/16/07
10/17/07
10/18/07

701
967
3,038
1,447
9,266
15,661
19,185
7,611
1,382
52

63

124
337
123

28
6,900
1,409
231
572
3,288
33,644
13,074
19,163
2,752
47
615
934
10,644
7,470
17,176
18,439
26,266
31,393
6,567
1,425
1,461
195
1,286
9,361
15

871
4,469
296
742
220
62
282
2,132

0.5499
0.5523
0.5590
0.5739
0.5712
0.5856
0.5905
0.5759
0.5709
0.5811
0.5779
0.5990
0.6005
0.5790
0.4739
0.5514
0.5286
0.4760
0.5175
0.5123
0.5323
0.5428
0.5327
0.5249
0.5200
0.5261
0.5137
0.5420
0.5593
0.5725
0.5586
0.5543
0.5585
0.5623
0.5724
0.5751
0.5626
0.5728
0.5758
0.5334
0.5771
0.5984
0.5839
0.5770
0.5800
0.5275
0.5929
0.5822

0.6193
0.6174
0.6198
0.6258
0.6464
0.6483
0.6527
0.6513
0.6633
0.6587
0.6299
0.6060
0.6245
0.6275
0.5523
0.5646
0.5619
0.5530
0.5573
0.5706
0.5921
0.5945
0.5977
0.5838
0.5775
0.5871
0.5920
0.6011
0.6020
0.6086
0.6164
0.6214
0.6276
0.6191
0.6281
0.7181
0.7222
0.7216
0.7242
0.6325
0.6292
0.6409
0.6362
0.6393
0.6335
0.6350
0.6352
0.6504

Basis

(0.0694)
(0.0651)
(0.0608)
(0.0519)
(0.0752)
(0.0627)
(0.0622)
(0.0754)
(0.0924)
(0.0776)
(0.0520)
(0.0070)
(0.0240)
(0.0485)
(0.0784)
(0.0132)
(0.0333)
(0.0770)
(0.0398)
(0.0583)
(0.0598)
(0.0517)
(0.0650)
(0.0589)
(0.0575)
(0.0610)
(0.0783)
(0.0591)
(0.0427)
(0.0361)
(0.0578)
(0.0671)
(0.0691)
(0.0568)
(0.0557)
(0.1430)
(0.1596)
(0.1488)
(0.1484)
(0.0991)
(0.0521)
(0.0425)
(0.0523)
(0.0623)
(0.0535)
(0.1075)
(0.0423)
(0.0682)

G2B

61.93
61.74
61.98
62.58
64.64
64.83
65.27
65.13
66.33
65.87
62.99

60.6
62.45
62.75
55.23
56.46
56.19

55.3
55.73
57.06
59.21
59.45
59.77
58.38
57.75
58.71

59.2
60.11

60.2
60.86
61.64
62.14
62.76
61.91
62.81
71.81
72.22
72.16
72.42
63.25
62.92
64.09
63.62
63.93
63.35

63.5
63.52
65.04

(694.00)
(651.00)
(608.00)
(519.00)
(752.00)
(627.00)
(622.00)
(754.00)
(924.00)
(776.00)
(520.00)

(70.00)
(240.00)
(485.00)
(784.00)
(132.00)
(333.00)
(770.00)
(398.00)
(583.00)
(598.00)
(517.00)
(650.00)
(589.00)
(575.00)
(610.00)
(783.00)
(591.00)
(427.00)
(361.00)
(578.00)
(671.00)
(691.00)
(568.00)
(557.00)

(1,430.00)

(1,596.00)

(1,488.00)

(1,484.00)
(991.00)
(521.00)
(425.00)
(523.00)
(623.00)
(535.00)

(1,075.00)
(423.00)
(682.00)


Submission of Woods Eastland, Representing AMCOT
Before the Commodity Futures Trading Commission Roundtable
April 22, 2008

I am serving as President and CEO of Staplcotn, a cotton marketing cooperative.
Staplcotn is a member of Amcot, the trade association of Calcot of Bakersfield, California, Plains
Cotton Cooperative Association of Lubbock, Texas, Staple Cotton Cooperative Association
(Staplcotn) of Greenwood, Mississippi, and Carolina’s Cotton Growers Association of Raleigh,
North Carolina. I am submitting this statement on behalf of Amcot.

The public policy of the United States in regard to the practices of regulated commodity
exchanges is embodied in the Commodity Exchange Act 7 USC/et seq. Title 7, Chapter 1, Section
5 states:

(a) Findings

The transactions subject to this Act are entered into regularly in interstate and
international commerce and are affected with a national public interest by
providing a means for managing and assuming price risks, discovering prices, or
disseminating pricing information through trading in liquid, fair and financially
secure trading facilities.

(b) Purpose

It is the purpose of this Act to serve the public interests described in subsection
(a) of this section through a system of effective self-regulation of trading
facilities, clearing systems, market participants and market professionals under
the oversight of the Commission. To foster these public interests, it is further the
purpose of this chapter to deter and prevent price manipulation or any other
disruptions to market integrity; .....

Section 6(a) “Excessive Speculation” further states:

Excessive speculation in any commodity under contracts of sale of such
commodity for future delivery made on or subject to the rules of contract markets
or unreasonable fluctuations or unwarranted changes in the price of such
commodity, is an undue and unnecessary burden on interstate commerce in such
commodity. For the purpose of diminishing, eliminating, or preventing such
burdens, the Commission shall, from time to time, after due notice and
opportunity for hearing, by rule, regulation, or order, proclaim and fix such limits
on the amounts of trading which may be done or positions which may be held by
any person under contracts of sale of such commodity for future delivery on or
subject to the rules of any contract market or derivatives transaction execution
facility as the Commission finds are necessary to diminish, eliminate, or prevent
such burden.

The strongest evidence of whether a contract market satisfied its obligation to the public
interest of managing and assuming price risks, discovering prices, or disseminating pricing
information, and preventing excessive speculation or unwarranted changes in the price of such
commodity so as to constitute an undue and unnecessary burden on interstate commerce, is the
relationship between the futures price and the cash market price of the commodity. Not only is


Trade Date

3/7/08
3/10/08
3/11/08
3/12/08
3/14/08
3/17/08
3/18/08
3/19/08
3/20/08
3/24/08
3/25/08
3/26/08
3/27/08
3/28/08
3/31/08

4/1/08

4/2/08

4/3/08

4/4/08

4/7/08

4/8/08

4/9/08
4/10/08
4/11/08
4/14/08

Bales Average Price Nearby Futures

701
681
1,455
1,744
1,709
30
278
975
1,182
2,058
752
485
1,020
352
740
2,765
6,718
558
2,173
2,328
3,189
5,783
1,928
1,279
3,307

0.6509
0.6458
0.6181
0.6377
0.6314
0.6235
0.6588
0.6155
0.5861
0.6045
0.6029
0.6022
0.6050
0.5904
0.5756
0.5988
0.6182
0.6004
0.6025
0.6379
0.6381
0.6338
0.6316
0.6022
0.6185

0.8128
0.7728
0.8121
0.8194
0.7895
0.7530
0.7481
0.7399
0.7200
0.7303
0.7438
0.7371
0.7332
0.7231
0.7004
0.7009
0.7019
0.7046
0.7052
0.7277
0.7202
0.7329
0.7476
0.7397
0.7406

Basis

(0.1619)
(0.1270)
(0.1940)
(0.1817)
(0.1581)
(0.1295)
(0.0893)
(0.1244)
(0.1339)
(0.1258)
(0.1409)
(0.1349)
(0.1282)
(0.1327)
(0.1248)
(0.1021)
(0.0837)
(0.1042)
(0.1027)
(0.0898)
(0.0821)
(0.0991)
(0.1160)
(0.1375)
(0.1221)

G2B

81,28
77.28
81.21
81.94
78.95
75,3
74.81
73.99
72
73.03
74.38
73.71
73.32
72.31
70.04
70.09
70.19
70.46
70.52
72.77
72.02
73.29
74.76
73.97
74.06

(4,619.00)
(1,270.00)
(1,940.00)
(1,817.00)
(1,581.00)
(1,295.00)

(893.00)
(1,244.00)
(1,339.00)
(1,258.00)
(1,409.00)
(1,349.00)
(1,282.00)
(4,327.00)
(1,248.00)
(1,021.00)

(837.00)
(1,042.00)
(1,027.00)

(898.00)

(821.00)

(991.00)
(1,160.00)
(1,375,00)
(1,221.00)


Trade Date

12/28/07
12/31/07
1/2/08
1/3/08
1/4108
1/7108
1/8/08
1/9/08
1/10/08
1/11/08
1/14/08
1/15/08
1/16/08
1/17/08
1/18/08
1/21/08
1/22/08
1/23/08
1/24/08
1/25/08
1/28/08
1/29/08
1/30/08
1/31/08
2/1/08
2/4/08
2/5/08
2/6/08
2/7/08
2/8/08
2/11/08
2/13/08
2/14/08
2/15/08
2/18/08
2/19/08
2/20/08
2/21/08
2/22/08
2/25/08
2/26/08
2/27/08
2/28/08
2/29/08
3/3/08
3/4/08
3/5/08
3/6/08

Bales
17,665
5,412
32,197
13,172
6,148
19,586
19,044
11,528
193
32,058
62,793
9,366
2,897
7,537
760
1,611
1,611
982
1,080
1,985
2,260
1,397
2,850
889
2,915
7,708
11,471
17,407
1,476
10,162
232
10,647
28,253
2,540
33
13,585
15,999
40,618
11,411
14,150
1,246
88
3,726
1,131
5,168
924
169
1,660

Average Price Nearby Futures

0.6099
0.6014
0.6178
0.6228
0.6180
0.6154
0.6205
0.6211
0.6029
0.6298
0.6490
0.6389
0.6369
0.6412
0.5987
0.6116
0.6051
0.5839
0.5532
0.6130
0.5940
0.5918
0.6074
0.5931
0.6164
0.6181
0.6226
0.6199
0.6139
0.6130
0.6289
0.6001
0.6249
0.6156
0.4939
0.6345
0.6338
0.6526
0.6698
0.6919
0.6330
0.6700
0.6735
0.6585
0.6759
0.6340
0.6401
0.6374

0.6776
0.6783
0,6869
0.6869
0.6852
0.6878
0.6939
0.6954
0.6780
0.6958
0.7285
0.7190
0.7119
0.7210
0.7082
0.7079
0.6999
0.6815
0.6823
0.6821
0.6808
0.6833
0.6859
0.6793
0.6818
0.6858
0.6806
0.6915
0.6839
0.6906
0.6762
0.6707
0.6961
0.7056
0.7018
0.7172
0.7219
0.7438
0.7619
0.7798
0.7966
0.7910
0.7889
0.8166
0.8486
0.8886
0.9274
0.8582

Basis
(0.0677)
(0.0769)
(0.0691)
(0.0641)
(0.0672)
(0.0724)
(0.0734)
(0.0743)
(0.0751)
(0.0660)
(0.0795)
(0.0801)
(0.0750)
(0.0798)
(0.1095)
(0.0963)
(0.0948)
(0.0976)
(0.1291)
(0.0691)
(0.0868)
(0.0915)
(0.0785)
(0.0862)
(0.0654)
(0.0677)
(0.0580)
(0.0716)
(0.0700)
(0.0776)
(0.0473)
(0.0706)
(0.0712)
(0.0900)
(0.2079)
(0.0827)
(0.0881)
(0.0912)
(0.0921)
(0.0879)
(0.1636)
(0.1210)
(0.1154)
(0.1581)
(0.1727)
(0.2546)
(0.2873)
(0.2208)

G2B

67.76
67.83
68.69
68.69
68.52
68.78
69.39
69.54

67.8
69.58
72.85

71.9
7119

an
70.82
70.79
69.99
68.15
68.23
68.21
68.08
68.33
68.59
67.93
68.18
68.58
68.06
69.15
68.39
69.06
67.62
67.07
69.61
70.56
70.18
71.72
72.19
74.38
76.19
77.98
79.66

79.1
78.89
81.66
84.86
88.86
92.74
85.82

(677.00)
(769.00)
(691.00)
(641.00)
(672.00)
(724.00)
(734.00)
(743.00)
(751.00)
(660.00)
(795.00)
(801.00)
(750.00)
(798.00)
(1,095.00)
(963.00)
(948.00)
(976.00)
(1,291.00)
(691.00)
(868.00)
(915.00)
(785.00)
(862.00)
(654.00)
(677.00)
(580.00)
(716.00)
(700.00)
(776.00)
(473.00)
(706.00)
(712.00)
(900.00)
(2,079.00)
(827.00)
(881.00)
(912.00)
(921.00)
(879.00)
(1,636.00)
(1,210.00)
(1,154.00)
(1,581.00)
(1,727.00)
(2,546.00)
(2,873.00)
(2,208.00)


Buyer to Buyer Sales

Basis

——Futures "Basis

Nearby Futures

a0iybit
R0/LIP
BO/LEIE
Bolvere
BOILIE
BO/0LIE
BO/EIE
B0/S2/z
BO/BL/2
BOIL LIZ
BOlvIe
80/82
BO/LzL
BOrvh/L
‘BO/L/t
2o/veret
Loivereh
LOILW2L
2OI0L2L
Lore seh
20/92/44
LOIBLILA
LOVEE
2O/SILL
20/62/01
Lofez/01
2LOISLIOL
LO/BIO‘
LO/IOL
LO/v2/6
LOILLI6
20/0116
Lo/e/6
LOILZ/8
0102/8
Lore 18
2019/8
Lo/0e/2
LoreeiL
LOIDKIL
LOI6IL
LOL

Bale:
50,000

40,000

30,000

20,000

10,000



potentially costs them trading volume, which costs them money. Also the open interest position
of speculators and of traders defined by the CFTC as “hedgers”, but who don’t trade the physical
commodity in interstate commerce has grown exponentially. Consider for instance that the dollar
volume of investor funds tied to the Standard & Poor’s Goldman Sachs Commodity Index (S&P
GSCI) has grown from $60 billion in 2006, to $85 billion in 2007, and is projected by some to
reach $100 billion in 2008. (Source: Pastine, Alejandro S., “Speculation and Cotton Prices,”
Cotton: Review of the World Situation, International Cotton Advisory Committee, Volume 61 —
Number 4, March-April, 2008). This excellent analysis points out that even though the dollar
value of index traders funds has increased dramatically, in cotton at least, “index traders have not
been the main force behind the increase in open interest for cotton futures and options, but non-
index traders speculators have.” It includes the following table:

Speculator's Long Positions, by Trader (averages)

Speculator's Long Positions Trader's Long sited |

Non-IT | Non-IT

Long! Spread/

Total Index Non-Index Traders IT/Total | Non-IT Non-IT | Non-IT

Year Traders Total Long Spread Spec__| TotalSpec| Total Total

2006 144,679) 72,813} 71,866] 26,098 45,768} 50%| 50%| 36%| 64%
2007, 243,682| 96,149] 147,533} 53,458} 94,075) 39%| 61% 36%| 64%
2008 317,420} 111,382} 205,638] 83,471 122,167] 35%| 65%| 41% 59%|

The huge increases in open interest in agricultural futures markets, driven by the
acceptance of commodity futures as an investment grade asset class and the emergence of the
long only index funds, both coupled with the phenomenon of contract markets operated and
managed for profit, have thrown these markets into disorder. The finite nature of the volume of
contracts of the agricultural commodity that can be entered into by the true hedger remains the
same — it is limited to the volume of the crop produced that remains unconsumed. However, the
volume of contracts now being entered into by non-hedgers of the physical agricultural
commodity is growing almost exponentially. Since the index fund component of these must
always be long, there must exist a logical bias for the non-index speculators to be unduly long
also. The self-regulation concept of the CFTC has failed. It seems to be asking too much of a for
profit contract market on its own initiative to take action that limits the increased participation of
the index trader and non-index speculator trader sufficiently to return enough balance so that the
markets are returned to their mandated function of providing price discovery and risk transfer.
Additionally, during the times these changes in market participants have occurred, the CFTC has
accommodated the desire of the for profit exchanges to increase open interest by increasing its
permitted position limits.

Under current statute the CFTC must regulate these markets so that a means is provided
for managing and assuming price risks, discovering prices, or disseminating pricing information
through trading in liquid, fair, and financially secure trading facilities; to deter and prevent price
manipulation or other disruptions to market integrity; and to prevent excessive speculation or
unreasonable fluctuations or unwarranted changes in the price of the commodity. Failure to do so
places an unnecessary burden on interstate commerce. Currently, in my opinion, the Boards and
managements of the agricultural commodity markets through self-regulation, and the CFTC
through regulation, are failing in their statutory obligations to achieve these ends. Hopefully this
hearing is part of a process by which the CFTC will meet its statutory obligation. Failure to do so
will result in these markets being managed and regulated for the purpose of providing investment


Trade Date
11/29/07
11/30/07

12/3/07
12/4/07
12/5/07
12/6/07
12/7/07
12/10/07
12/11/07
12/12/07
12/13/07
12/14/07
12/17/07
12/18/07
12/19/07
12/20/07
12/21/07
12/26/07
12/27/07
12/28/07
12/31/07
1/2/08
1/3/08
1/4/08
1/7/08
1/8/08
1/9/08
1/10/08
4/11/08
1/14/08
1/15/08
1/16/08
1/17/08
1/18/08
1/21/08
1/22/08
1/23/08
1/24/08
1/25/08
1/28/08
1/29/08
1/30/08
1/31/08
2/1/08
2/4/08
2/5/08
2/6/08
2/7/08

Bales Average Price Nearby Futures

2,380
1,718
420
1,176
56
1,206
721

34
1,018
13,140
5,004
1,645
2,345
449
3,209
3,223
§,324
1,789
4,422
620
194
6,408
14,507
9,294
2,385
19,858
4,350
3
45,389
24,817
3,730
189
24,889
1,287
256

17
2,183
3,996
10,083
3,210
1,728
361
2,420
1,988
2,213
5,589
10,558
1,051

0.5430
0.5514
0.6025
0.5489
0.4928
0.5423
0.5157
0.5100
0.5727
0.4944
0.5258
0.5937
0.5849
0.6172
0.6100
0.6004
0.6008
0.5851
0.6164
0.6087
0.5803
0.6281
0.6118
0.6428
0.6212
0.6340
0.6187
0.4500
0.6301
0.6469
0.6170
0.6319
0.6646
0.6294
0.6476
0.5300
0.6040
0.6021
0.6475
0.6273
0.6386
0.6037
0.6220
0.6177
0.6036
0.6236
0.6501
0.6253

0.6511
0.6367
0.6345
0.6373
0.6325
0.6376
0.6450
0.6461
0.6413
0.6520
0.6490
0.6554
0.6573
0.6561
0.6633
0.6636
0.6635
0.6710
0.6773
0.6780
0.6780
0.6856
0.6863
0.6850
0.6889
0.6927
0.6959
0.6772
0.6913
0.7231
0.7171
0.7118
0.7215
0.7117
0.7079
0.6965
0.6826
0.6766
0.6800
0.6842
0.6835
0.6879
0.6770
0.6806
0.6870
0.6803
0.6894
0.6836

Basis

(0.1081)
(0.0853)
(0.0320)
(0.0884)
(0.1397)
(0.0953)
(0.1293)
(0.1361)
(0.0686)
(0.1576)
(0.1232)
(0.0617)
(0.0724)
(0.0389)
(0.0533)
(0.0632)
(0.0627)
(0.0859)
(0.0609)
(0.0693)
(0.0977)
(0.0575)
(0.0745)
(0.0422)
(0.0677)
(0.0587)
(0.0772)
(0.2272)
(0.0612)
(0.0762)
(0.1001)
(0.0799)
(0.0569)
(0,0823)
(0.0603)
(0.1665)
(0.0786)
(0.0745)
(0.0325)
(0.0569)
(0.0449)
(0.0842)
(0.0550)
(0.0629)
(0.0834)
(0.0567)
(0.0393)
(0.0583)

B2B

65.11
63.67
63.45
63.73
63.25
63.76
64.5
64.61
64.13
65.2
64.9
65.54
65.73
65.61
66.33
66.36
66.35
67.1
67.73
67.8
67.8
68.56
68.63
68.5
68.89
69.27
69.59
67.72
69.13
72.31
71.71
71.18
72.15
TIAL
70.79
69.65
68.26
67.66
68
68.42
68.35
68.79
67.7
68.06
68.7
68.03
68.94
68.36

(1,081.00)
(853.00)
(320.00)
(884.00)

(1,397.00)
(953.00)

(1,293.00)

(1,361.00)
(686.00)

(1,576.00)

(1,232.00)
(617.00)
(724.00)
(389.00)
(533.00)
(632.00)
(627.00)
(859.00)
(609.00)
(693.00)
(977.00)
(575.00)
(745.00)
(422.00)
(677.00)
(587.00)
(772.00)

(2,272.00)
(612.00)
(762,00)

(1,001.00)
(799.00)
(569.00)
(823.00)
(603.00)

(1,665.00)
(786.00)
(745.00)
(325.00)
(569.00)
(449.00)
(842.00)
(550.00)
(629.00)
(834.00)
(567.00)
(393.00)
(583.00)


(on volume of 40,618 bales) and continued to deteriorate to 2546 off on 3/4/08 and 2873 off on
3/05/08, and has remained wide thereafter. Results in the buyer to buyer venue are similar.

Where Are We Today in Cotton?

(1) The futures and options markets today are not reliable discoverers of prices. When
futures increase 21.15¢ in absolute terms (February 20 — March 4) and 30.87¢ in
synthetic value while the cash market (as measured by the Seam’s Grower to Buyer
market) increases 4.21¢/Ib, any semblance of a reliable relationship upon which
business decisions can be made is destroyed.
The futures and options markets are not reliable vehicles for transferring risk. A
buyer who bought physical cotton on the Seam from a grower on February 20 at
63.38¢/Ib, hedged the purchase at spot month futures of 72.19¢, and then sold the
cotton on 3/04 at 63.40¢ and bought back his short hedge would have lost 16.65¢/Ib,
or 26.3% of the purchase price. This certainly fits the Act’s definition of an
unreasonable fluctuation or unwarranted change in the price of the commodity that
constitutes an unnecessary burden on interstate commerce.
(3) Fear of a repetition of these events prevents the middlemen between producers and
mill consumers from entering into forward crop contracts, unduly burdening
interstate commerce in the commodity.

(2

During and since these occurrences, the management and Board of Ice Futures US has
failed to fulfill its self-regulation requirement under the Act to meet its statutory obligation to the
public, and the Commodity Futures Trading Commission has failed to fulfill its statutory
obligation under the Act to force the management and Board of Ice Futures US, and other
contract markets similarly impacted, to take such action. I understand that the situation is not
unique to cotton.

Why Do These Markets No Longer Serve As Acceptable Vehicles for Price Discovery and
Risk transfer, and What Can Be Done to Restore Them?

In governing an agricultural futures market, every decision must recognize one salient
fact — the number of true hedges of the physical agricultural commodity that can be placed in the
contract market is finite because it is dependent on the size of the crop, and how much of that
limited supply remains unconsumed. All futures or options positions in excess of that number are
not true hedges of the physicals. This is recognized in the Act and has historically been
recognized by placing limits on the size of the positions of every class of market participant.
What was historically achieved was a careful balance between hedgers of the physical commodity
and speculators, that kept the relationship between the price of the futures contract and the cash
commodity within a historically recognized range that was generally accepted by the trade in their
cash contracts, thus not burdening interstate commerce. Achieving this balance was made easier
in that many classes of pooled money, such as pension funds, chose not to trade in commodity
markets under the belief that they were too speculative. The agricultural commodity markets thus
were governed and regulated overwhelmingly in order to facilitate the flow of the physical
agricultural commodity through the distribution chain. The fact that most of the approved
contract markets were not organized for profit meant that the owners and the Board they elected
were concerned most with achieving price discovery and risk transfer for themselves.

All this changed and has thrown things out of balance. Currently there is an inherent
conflict of interest between the management and Boards of for profit exchanges and their self-
regulatory obligation. To limit market participants to achieve the requirements of the Act


convergence during delivery expected, but also a normal range of the spread or basis between the
two markets during trading between delivery periods. A normal basis spread over time is readily
observable and should be expected in a contract market meeting its obligations to the public.
When divergence between cash and futures of an abnormal degree occurs, that contract market is
failing to meet its responsibility to the public under the Act, and its Board and management, and
the Commission, are statutorily bound to take immediate corrective action.

The Cotton Situation

The fundamental cotton supply and demand background against which the cotton cash
market and ICE Futures US have been trading is one of the realization of increasingly
burdensome supplies.

Monthly U.S. Cotton Supply/Demand Estimates
For
2007 Crop Marketing Year
(August 1, 2007 — July 31, 2008)
Source: USDA
(million of 480 Ib. bales)

Projected Projected Projected

2007 2007 U.S. 2007 U.S. 7/31/2008

Production Mill Use Exports Carryover
August 17.4 4.6 16.7 5.8
October 18.2 4.6 16.7 6.4
December 19.0 4.6 16.2 RI
February 19.0 4.6 15.7 8.2
March 19.0 4.6 14.5 9.4
April 19.4 4.7 14.5 97

Against this background, please observe the behavior of cotton futures from July 2007
through April 16, 2008. This is a daily continuation chart of futures only, limited by their daily
trading limit. If it were adjusted to reflect the synthetic high value of the May Futures contract as
measured by the value of call options on that futures contract, the high would have been $1.09.

(See Attachment — Cotton Daily Continuation Chart)

Now please observe the behavior of the cash market during this same period of time, as
expressed as a basis (cash minus futures). The cash market presented is the average daily cash
price on the Seam, a liquid electronic cash market that has two sales venues, grower to buyer
sales and buyer to buyer (inter-merchant or inter-shipper sales). The daily sales volume for each
appears below the basis graph.

(See Attachment - Grower to Buyer Sales Graph)
(See Attachment - Buyer to Buyer Sales Graph)
The failure of the cash market to follow futures and thus their divergence, is readily

apparent by measuring the deterioration of the basis. After trading in the grower to buyer venue
at an average of about 550 off from 7/01/07 through 2/11/08, it deteriorated to 912 off on 2/21/08


Trade Date

7/2/07
7/3/07
7/4/07
7/5/07
7/6/07
7/9/07
7/10/07
7/11/07
7/12/07
7/13/07
7/16/07
7/18/07
79/07
7/20/07
7/23/07
7/24/07
7/25/07
7/30/07
7/31/07
8/1/07
8/2/07
8/3/07
8/7/07
8/8/07
8/9/07
8/10/07
8/13/07
8/14/07
8/15/07
8/16/07
8/17/07
8/20/07
8/21/07
8/22/07
8/23/07
8/24/07
8/27/07
8/28/07
8/30/07
8/31/07
9/4/07
9/5/07
9/6/07
9/7/07
9/10/07
9/11/07
9/12/07
9/13/07

Bales
5,480
13,569
10,000
1,287
6,558
7,084
9,473
1,175
4,656
19,722
358
3,933
15
33211
2,615
302
5,741
2,588
2,495
5,533
6,247
40
5,840
1,489
2,056
1,516
6,531
1,165
452
7,041
6,986
2,035
2,774
2,446
13,764
601
5,898
853
3,816
574
191
2,771
33
192
1,670
265
8,036
398

Average Price Nearby Futures

0.5688
0.5589
0.5234
0.5735
0.5692
0.5842
0.6001
0.5950
0.6023
0.6119
0.5715
0.5636
0.5335
0.5410
0.5437
0.5472
0.5513
0.5555
0.6000
0.5653
0.5691
0.5150
0.5569
0.5805
0.5881
0.5400
0.5519
0.5597
0.5116
0.4996
0.5185
0.5468
0.5262
0.5449
0.5469
0.5425
0.5137
0.5305
0.5341
0.5300
0.5650
0.5613
0.4990
0.4962
0.5337
0.5145
0.5684
0.5380

0.6185
0.6164
0.6175
0.6200
0.6256
0.6451
0.6520
0.6525
0.6500
0.6619
0.6580
0.6387
0.6307
0.6025
0.6087
0.6170
0.6164
0.6247
0.6200
0.6214
0.6219
0.6275
0.6127
0.6118
0.6004
0.5900
0.5910
0.5835
0.5841
0.5536
0.5550
0.5700
0.5629
0.5631
0.5645
0.5610
0.5519
0.5550
0.5683
0.5878
0.5980
0.6030
0.5791
0.5772
0.5853
0.5915
0.6005
0.6011

Basis

(0.0497)
(0.0575)
(0.0941)
(0.0465)
(0.0564)
(0.0609)
(0.0519)
(0.0575)
(0.0477)
(0.0500)
(0.0865)
(0.0751)
(0.0972)
(0.0615)
(0.0650)
(0.0698)
(0.0651)
(0.0692)
(0.0200)
(0.0561)
(0.0528)
(0.1125)
(0.0558)
(0.0313)
(0.0123)
(0.0500)
(0.0391)
(0.0238)
(0.0725)
(0.0540)
(0.0365)
(0.0232)
(0.0367)
(0.0182)
(0.0176)
(0.0185)
(0.0382)
(0.0245)
(0.0342)
(0.0578)
(0.0330)
(0.0417)
(0.0801)
(0.0810)
(0.0516)
(0.0770)
(0.0321)
(0.0631)

B2B

61.85
61.64
61.75
62
62.56
64.51
65.2
65.25
65
66.19
65.8
63.87
63.07
60.25
60.87
61.7
61.64
62.47
62
62.14
62.19
62.75
61.27
61.18
60.04
59
59.1
58.35
58.41
55.36
55.5
57
56.29
56.31
56.45
56.1
55.19
55.5
56.83
58.78
59.8
60.3
57.91
57.72
58.53
59.15
60.05
60.11

(497.00)
(575.00)
(941.00)
(465.00)
(564.00)
(609.00)
(519.00)
(575.00)
(477.00)
(500.00)
(865,00)
(751.00)
(972.00)
(615.00)
(650.00)
(698.00)
(651.00)
(692.00)
(200.00)
(561.00)
(528.00)
(1,125.00)
(558.00)
(313.00)
(123.00)
(500.00)
(391.00)
(238.00)
(725.00)
(540.00)
(365.00)
(232.00)
(367.00)
(182.00)
(176.00)
(185.00)
(382.00)
(245.00)
(342.00)
(578.00)
(330.00)
(417.00)
(801.00)
(810.00)
(516.00)
(770.00)
(321.00)
(631.00)


Trade Date
2/8/08
2/11/08
2/12/08
2/13/08
2/14/08
2/15/08
2/19/08
2/20/08
2/21/08
2/22/08
2/25/08
2/26/08
2/28/08
2/29/08
3/3/08
3/4/08
3/5/08
3/6/08
3/7/08
3/10/08
3/11/08
3/12/08
3/13/08
3/14/08
3/17/08
3/18/08
3/20/08
3/24/08
3/25/08
3/26/08
3/31/08
4/1/08
4/2/08
4/3/08
4/4/08
4/7/08
4/8/08
4/9/08
4/10/08
4/11/08
4/14/08

Bales Average Price Nearby Futures

2,704
1,035
3,413
3,055
5,528
2,628
3,846
13,573
49,870
27,200
17,941
4,004
1,889
3,900
5,773
2,821
166
3,359
1,295
344
663
1,452
15,318
5,456
123
225
606
6,772
1,137
662
1,368
838
5,937
2,257
5,716
5,592
1,719
11,834
3,553
7,279
1,375

0.6632
0.6088
0.6099
0.6069
0.6477
0.6521
0.6464
0.6354
0.6753
0.6782
0.6875
0.6804
0.6339
0.6672
0.6775
0.7357
0.4000
0.6560
0.6794
0.6850
0.6684
0.6373
0.6200
0.6165
0.4018
0.6110
0.5691
0.6167
0.6289
0.5770
0.6412
0.5775
0.6045
0.6063
0.6372
0.6676
0.6121
0.6646
0.6838
0.6568
0.6324

0.6866
0.6722
0.6691
0.6691
0.6978
0.6920
0.7181
0.7183
0.7434
0.7630
0.7786
0.7933
0.7933
0.8142
0.8384
0.8886
0.8887
0.8600
0.8128
0.7728
0.8119
0.8085
0.8132
0.8007
0.7530
0.7428
0.7175
0.7271
0.7463
0.7376
0.7049
0.7005
0.7019
0.7027
0.7068
0.7288
0.7219
0.7290
0.7477
0.7417
0.7405

Basis

(0.0234)
(0.0634)
(0.0592)
(0.0622)
(0.0501)
(0.0399)
(0.0717)
(0.0829)
(0.0681)
(0.0848)
(0.0911)
(0.1129)
(0.1594)
(0.1470)
(0.1609)
(0.1529)
(0.4887)
(0.2040)
(0.1334)
(0.0878)
(0.1435)
(0.1712)
(0.1932)
(0.1842)
(0.3512)
(0.1318)
(0.1484)
(0.1104)
(0.1174)
(0.1606)
(0.0637)
(0.1230)
(0.0974)
(0.0964)
(0.0696)
(0.0612)
(0.1098)
(0.0644)
(0.0639)
(0.0849)
(0.1081)

B2B

68.66
67.22
66.91
66.91
69.78

69.2
71.81
71.83
74.34

76.3
77.86
79.33
79.33
81.42
83.84
88.86
88.87

81.28
77.28
81.19
80.85
81.32
80.07

75.3
74.28
71.75
72.71
74.63
73.76
70.49
70.05
70.19
70.27
70.68
72.88
72.19

72.9
74.77
74.17
74.05

(234.00)
(634.00)
(592.00)
(622.00)
(501.00)
(399.00)
(717.00)
(829.00)
(681.00)
(848.00)
(911.00)

(1,129.00)

(1,594.00)

(1,470.00)

(1,609.00)

(1,529.00)

(4,887.00)

(2,040.00)

(1,334.00)
(878.00)

(1,435.00)

(4,712.00)

(1,932.00)

(1,842.00)

(3,512.00)

(1,318.00)

(1,484.00)

(1,104.00)

(1,174.00)

(1,606.00)
(637.00)

(1,230.00)
(974.00)
(964.00)
(696.00)
(612.00)

(1,098.00)
(644.00)
(639.00)
(849.00)

(1,081.00)