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COT Reports Level Market Playing Field Between Small and Large Market Players

Major commodity and agricultural groups sent a letter to the Commodity Futures Trading Commission Acting Secretary Eileen Donovan recently, citing the importance of Commitments of Traders Reports to agricultural producers and the need for more details within the reports.

The joint letter was in response to the CFTC's Comprehensive Review of the Commitments of Traders Reporting Program, published in the Federal Register on June 21, 2006, and the commission's review of the program.

The organizations oppose the elimination of the COT Reports because of the importance of this information to producers.

"The Commitments of Traders (COT) Reports are a great asset to all users of agricultural futures and options•COT Reports are especially important to agricultural producers," the letter states. "The easy availability of this information is one of the great levelers of the market playing field between small and large market players. This is critical for individual agricultural producers who do not have the time or resources to follow the futures markets that commercial users or speculative traders do."

The letter also touches on marketing and marketing behavior, stating that producers use the information on those who buy, sell and own titles to the commodity as a determination of marketing strategies and profitability. Ultimately, according to the commodity groups, "The market behavior of each of these participants varies, and the more information that producers have, the better they are able to determine and separate what they believe to be 'real, cash market effects' from other factors driving futures market prices. After all, it is these real cash market prices on which producers must depend for their livelihoods."

The letter also urges the CFTC to develop the reports, including more detailed information "to protect the interests of producers from the non-transparency that can result from the activity of non-traditional commercial trading entities in these markets."

The groups also urged the COT reports be published more often, on as close to a real time basis as is practicable.

"Sound risk management and marketing decisions require a good understanding of what is influencing the grain markets," says Sam Willett, NCGA senior director of public policy. "More transparent and timely COT Reports will increase the chances of corn growers maximizing returns on their commodities. The renewed interest in commodities among speculators and investors really underscores the need for this detailed information."

The following organizations signed the letter: American Soybean Association, National Association of Wheat Growers, National Barley Growers Association, National Corn Growers Association, National Cotton Council, National Farmers Union, National Sorghum Producers, US Canola Association, USA Rice Federation and US Rice Producers Association.