Excessive Wheat Speculation Investigation Results Released

The Senate Investigations Subcommittee has released a 247-page report examining the purchase of Chicago wheat contracts by index traders leading to significant unwarranted costs and price risks for farmers, grain elevators, grain processors and consumers, according to Farm Progress.

“In the last three years, speculators have spent billions of dollars on commodity indexes, and the financial firms selling those index instruments have purchased billions of dollars in commodity futures to offset their financial risks, creating price disruptions for producers and consumers,” said Sen. Carl Levin, (D-MI), chairman of the Senate Permanent Subcommittee on Investigations “It is another case of speculative money overwhelming a market, and federal regulators failing to take the steps needed to protect the market.”

A one-year bipartisan subcommittee investigation examined millions of trading records from the Chicago Mercantile Exchange, Kansas City Exchange, Minneapolis Grain Exchange, the Commodity Futures Trading Commission and others, to track and analyze wheat prices. The investigation determined that unwarranted price changes caused by index traders, made it difficult to use the futures market to protect against price changes and generated significant unanticipated costs. Those costs included higher margin calls due to higher futures prices, failed hedges, and disruption of normal pricing patterns and relationships.