Gary Gensler, chairman of the Commodity Futures Trading
Commission, told the US Senate in late July that the continued
lack of convergence between cash and futures prices for wheat
was unacceptable and had diminished the usefulness of the
futures market in the product.
Gensler was testifying to the Senate’s
Permanent Subcommittee on Investigations, in response to a
report by that subcommittee called Excessive Speculation in the
The report found that commodity index investors were one of
the primary causes for an excessive divergence between cash and
futures prices. Gensler said: "The average difference between
the Chicago Board of Trade wheat futures price at contract
expiration and Toledo cash wheat prices rose from an average of
about 5¢ per bushel in 2005 to 47¢ in 2006, narrowed
to 24¢ in 2007, but widened again to $1.07 in 2008."
The CME Group has amended the terms of its Hard Red Winter
Wheat Futures to address these concerns, with effect from the
July 2009 contract, but Gensler said the price difference for
July was still 83¢, which he regarded as unacceptable, as
it made the future an ineffective hedge.
"The continued lack of convergence in important segments of
the wheat market has significantly diminished the usefulness of
the wheat futures market for commercial hedgers," Gensler
It costs these companies more to do business, he argued,
because they are unable to effectively hedge their price risks.
"Ultimately, it is the American consumer who will bear the
burden of these increased costs," Gensler said.
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