Global commodities trading is critical to the efficient production and sale of food worldwide. Key risk management tools within the commodities trading system—financial instruments such as, futures, options and over-the-counter (OTC) derivatives—allow traders to purchase crops in advance and hedge risk to protect against market volatility. Commodities traders are heavily regulated by securities laws, but unlike bankers and traders of non-physical “paper” assets, those who deal in commodities hold and trade hard physical assets—and face a high level of real-world risk that is unique in the world’s financial services system.
Cargill believes that current and future reforms of commodity derivatives regulations must preserve the ability of companies operating in the physical markets to hedge their real risks of exposure to price movements over time, and protect the efficiency of agricultural markets as a whole.
Cargill favors properly regulated, cost-efficient markets, and we agree on the need for overall financial markets reform. We support the preservation of affordable end-user access to the OTC market, encourage improvements in the performance of futures markets, and support practical reporting requirements and position-management systems designed to prevent manipulation.
We encourage regulators to make a strong effort to ensure that commercial market participants—including farmers and the broader agricultural community—can continue to manage risk effectively without a dramatic increase in the cost of risk management.