Agency Investigates Legality of Grain Futures Contracts

WASHINGTON — The Commodity Futures Trading Commission is “aggressively investigating” possible fraud in contracts between farmers and operators of grain storage elevators that have left the operators facing huge potential losses, the head of the regulatory agency said Wednesday.

John Tull, CFTC acting chairman, told the Senate Agriculture Committee that the agency is trying to determine if so-called hedge-to-arrive contracts are illegal futures or options transactions. It is also trying to decide whether the people who designed such contracts should be registered with federal regulators.

At stake are unregulated hybrid agreements between farmers and elevator operators that give farmers a minimum price for their crop but don’t require delivery by a set date, which makes them different from traditional contracts for future delivery of a commodity.

The CFTC is examining whether fraud was committed in the marketing of hedge-to-arrive contracts, Tull said.