Because many farmers, grain merchandisers, and agribusiness firms are being deeply affected by the MF Global bankruptcy situation, the National Chicken Council this week joined almost 20 agriculture, food, and financial organizations in expressing strong concern over the consequences of the bankruptcy situation, in letters to leaders of the Senate Committee on Agriculture, Nutrition and Forestry and the House Agriculture Committee.
“Producers and agribusiness firms that rely on exchange-trading to facilitate risk management, as well as the lending institutions that support them, have had their confidence shaken in recent days,” the groups wrote. “We have always believed that the risk to customer funds when trading on-exchange was virtually zero. Now, we see that is not the case.”
The groups respectfully requested the committees’ attention to a number of issues, including the committee’s review of the protections in place that were intended to protect customer funds and possible changes to begin restoring confidence in future use of exchange-traded risk management tools, among others.
The letter highlighted the fact that the U.S. agricultural sector relies heavily on regulated exchanges for risk management and that the ability of both commercial and producer hedgers to use futures markets to manage price risk depends on lenders agreeing to meet margin calls, which demands full confidence by all lenders in the safety of those funds.
“Ultimately, our goals are twofold: to pursue all possible actions that will ensure that assets of MF Global customers will be returned quickly and to make sure this situation never recurs,” the groups continued. “We must be confident the system works, that it properly safeguards customer funds, and that customers can have full confidence in continuing to utilize exchange-traded tools.”
A full copy of the letter is available at www.nationalchickencouncil.com/files/mfg coalition ltr senate.doc
