The top U.S. commodity regulator said Tuesday that it would require investors and index funds to disclose more information about their holdings in agricultural markets after farmers and lawmakers alleged that speculators had inflated food prices.
The Commodity Futures Trading Commission, in an e-mailed statement, also said it would grant fewer exemptions to speculative-position limits related to agricultural index trading and would provide more detail on trader holdings starting next month.
“We want to make sure that markets are functioning correctly,” acting Chairman Walt Lukken told reporters in a conference call from Washington. “We want to encourage access to markets, but we want to be sure too much money isn’t distorting markets artificially.”
The regulator said it also was investigating possible manipulation of the cotton market in February and March, in addition to a probe announced May 29 of crude-oil trading. Cotton futures surged to a 12-year high of 92.86 cents a pound March 5, then tumbled 26% over the next 15 days.
The CFTC, which in addition to agricultural markets regulates trading in precious metals and derivatives linked to stock indexes and bonds, is under pressure from Congress to ensure that markets aren’t being manipulated. The prices of gold, copper, corn and wheat have recently set record highs, gasoline at the pump is the most expensive ever, and the government forecast an increase for U.S. food costs that will be the biggest since 1989.
Joe Lieberman, chairman of the Senate Homeland Security and Government Affairs Committee, said May 20 that he was considering legislation limiting investing by large institutions in commodity markets. Lieberman, a Connecticut independent, said the legislation would be aimed at speculators and other investors that use commodities to hedge against swings in instruments such as stocks and the dollar.
The CFTC also said it was working on ways to improve risk-management choices for farmers and agricultural businesses, including developing alternative financial tools and a plan for the clearing of agricultural swaps.
Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) praised the regulator’s announcement, saying it outlined a prudent approach that is “urgently needed for American commodity producers and consumers.”
The National Farmers Union called the initiatives a “first step” toward addressing the concerns of producers. The group has said increased market volatility may challenge farmers’ ability to hedge risks.