CFTC position limits — submit your comments
On Dec. 9, 2014, the Commodity Futures Trading Commission (CFTC), once again opened a “comment period” to grant the public the opportunity to voice opinions on the hotly contested proposal of revised speculative position limits. Prompted by the Dodd-Frank Act the CFTC has embarked on a steady campaign to implement a broader reaching and more aggressive regime of government-set speculative position limits. Because of the contentious nature of these proposed rules and the potential unintended consequences on agricultural and commodity-based industries, this is the fourth open comment period. So what’s the point of all this and why is it important to CMN readers? I hope to answer these questions along with what CMN readers can do about it. But first, let me give a little background.
Class I and Class II milk — simplified
Risk and its management have always been inseparably associated with all forms of economic activities. The intricacies, magnitude and dimensions of economic risks have grown exponentially with the growth and complexity of the dairy markets. One such aspect is managing risk for Class I and Class II milk. Unlike Class III and Class IV, they do not trade on the exchange and are a completely different ballgame.
It is essential to have an understanding of how Class I and Class II are priced in order to manage the risk effectively. Without going into the exact math, I have attempted to resolve some of the ambiguity in a concise manner.
Butter prices reflect transition in U.S. milkfat allocation
In a time where most dairy commodities are much lower than what we have seen over recent years,U.S. butter prices continue to trade higher than the 5-year average. The reason appears to be a major shift in the industry during the last few years with the total milkfat crop growing but finding its way into products outside of butter.