publication archive: Paul Peterson
March 21, 2013
What's Next for the Cattle Market?
Cattle feeders have witnessed record fed cattle prices over the past few years. But they also have experienced record prices for feed and feeder cattle, resulting in record feeding losses that at times exceeded $200 per head for Corn Belt cattle feeders. This has occurred despite the fact that cattle supplies have been declining for several years. The USDA cattle inventory in January reported the lowest beef cow numbers since 1962 and the smallest calf crop since 1949.Posted by Paul E. Peterson Permalink Tweet
February 14, 2013
Settling MF Global Claims: Who Gets What and Why?
On January 31, the bankruptcy court overseeing the MF Global liquidation approved a plan that will bring this case much closer to resolution. Following its collapse in October 2011, over 27,000 commodity customer claims totaling $10 billion and more than 1,000 securities customer claims totaling $1.4 billion were filed against MF Global Inc. These claims consisted of cash and other assets held in margin accounts, physical commodities held for delivery against futures positions, and investments held in brokerage accounts, all of which became unavailable when the company closed its doors.Posted by Paul E. Peterson Permalink Tweet
December 20, 2012
CFTC-SEC Merger Proposal May Have Hidden Costs
The Commodity Futures Trading Commission (CFTC) is the federal regulatory agency for the futures and options markets, and the Securities Exchange Commission (SEC) is the federal regulatory agency for the securities markets. The markets they regulate serve different economic purposes, and the agencies have different regulatory missions and philosophies, receive oversight from different Congressional committees, and in most other respects have very little in common. Nevertheless, periodically there is a proposal to merge these two agencies, usually as a way to achieve "synergies," "efficiencies" or various other promised benefits.Posted by Paul E. Peterson Permalink Tweet
October 31, 2012
Still More on Position Limits, Excessive Speculation and the Dodd-Frank Act
Two recent farmdoc Daily posts discussed the history of position limits and reviewed the CFTC's recently-overturned position limit rules, respectively. Today's post is the last in this series, and will examine the court ruling and discuss possible next steps by the CFTC.Posted by Paul E. Peterson Permalink Tweet
October 24, 2012
More on Position Limits, Excessive Speculation and the Dodd-Frank Act
A previous farmdoc Daily post discussed the history and operation of position limits - the maximum number of futures contacts that can be owned or controlled by an individual or entity - as a way to control excess speculation. To help our readers better understand this issue, today we will review the CFTC's position limit rules that were struck down recently by Judge Robert L. Wilkins, with a focus on the agricultural commodities. A future post will explore Judge Wilkins' ruling and discuss possible next steps by the CFTC.Posted by Paul E. Peterson Permalink Tweet
October 17, 2012
Position Limits, Excessive Speculation and the Dodd-Frank Act
Commodity position limits - the maximum number of futures contacts that can be owned or controlled by an individual or entity - have been in the news since Judge Robert L. Wilkins of the US District Court for the District of Columbia rejected a new system of position limits developed by the Commodity Futures Trading Commission (CFTC). To help our readers understand the implications of this action, today's farmdoc Daily will lay the groundwork by reviewing the history and operation of position limits. A later post will discuss the rejected CFTC position limits and evaluate the impact of Judge Wilkins' ruling.Posted by Paul E. Peterson Permalink Tweet
August 29, 2012
Consumer Spending and Beef Demand
Demand can be measured by the quantities that consumers are willing to buy over a range of different prices. This list of quantities and corresponding prices can be plotted to map out the familiar downward-sloping demand curve, with smaller quantities demanded at higher prices and larger quantities demanded at lower prices. Although "demand" is often used interchangeably - and incorrectly - with the quantity sold, an accurate picture of demand also requires some measure of the prices paid for each of the quantities sold.Posted by Paul E. Peterson Permalink Tweet
August 8, 2012
More Ways to Hedge the RP Guarantee Before Harvest
Recent Farmdoc Daily articles explained how prices in short-crop years often peak early and decline throughout the remainder of the marketing year, and then showed how farmers who insured using Revenue Protection (RP) insurance can use futures to protect insurance payments against a pre-harvest peak in crop prices.Posted by Paul E. Peterson and Gary Schnitkey Permalink Tweet
August 3, 2012
Lessons from LIBOR
The London Inter-Bank Offered Rate (LIBOR) is a measure of the interest rates at which major banks borrow funds from other major banks in the London market. Rates are calculated and published daily for 15 different maturities ranging from overnight to 12 months, denominated in 10 different currencies. Of these 150 different interest rates, the 3-Month US Dollar rate is the most widely followed.Posted by Paul E. Peterson Permalink Tweet
June 27, 2012
Trading Hours and Daily Settlement Prices
Most of the recent discussion on trading hours for the grain and oilseed markets has focused on the overlap of trading with the release times for various USDA reports. In response to concerns about market and commercial impact from the release of major USDA crop and livestock reports during market hours, USDA published a request for public comment in the Federal Register with comments due by July 9.Posted by Paul Peterson Permalink Tweet
June 1, 2012
Beef Supplies and Cattle Industry Expansion Plans
With the cookout season in full swing, it's a good time to take a close look at beef supplies and cattle numbers. Steaks, roasts and other retail cuts come almost exclusively from steers and heifers. Beef from steers and heifers - often called "fed beef" - accounts for about 85% of total beef production. The remaining 15% consists of cuts from cows and bulls (used primarily in further-processed products) and calves (for veal and other specialty items).Posted by Paul E. Peterson Permalink Tweet
May 11, 2012
How Many Futures Contracts Can One Market Support?
On April 12, the InterContinental Exchange (ICE) announced that it will be offering futures and options contracts for corn, wheat, soybeans, soybean meal and soybean oil beginning Monday, May 14. All five contracts will be settled daily to the corresponding Chicago Board of Trade (CBOT) prices, and final settlement will rely on cash settlement rather than physical delivery. Trading hours will be from 8 PM Sunday to 6 PM Friday, which is substantially longer than the CBOT's current 6:00 PM to 7:15 AM and 9:30 AM to 1:15 PM trading day.Posted by Paul E. Peterson Permalink Tweet
April 5, 2012
Is There a Transaction Tax in Your Future?
A financial transaction tax - collected each time a futures or options contract is traded - is under serious consideration in Europe. In September 2011 the European Commission proposed a 0.01 percent on derivatives trades (including futures and options), along with a separate tax on stock and bond trades. Together these two taxes are expected to raise 57 billion Euros ($89 billion) in new revenues. Britain, which is home to a thriving global financial center in London, would bear the brunt of this tax and has vowed to veto it. Other countries with much smaller financial sectors, led by France and Germany and joined by Austria, Belgium, Finland, Greece, Italy, Portugal, and Spain, strongly support this tax. These nine countries claim to be prepared to implement some version of this tax on a country-by-country basis if the EU-wide effort fails.Posted by Paul E. Peterson Permalink Tweet
February 22, 2012
Should I Sell My MF Global Claim?
As described in a previous FarmDoc Daily article MF Global failed on October 31, 2011 with a shortfall in customer funds of $1.2 billion (since increased to $1.6 billion) affecting approximately 38,000 futures accounts. A large percentage of these accounts were held by individuals and entities in the agricultural sector.Posted by Paul E. Peterson Permalink Tweet
January 26, 2012
Customer Accounts and the MF Global Bankruptcy
MF Global failed on October 31, 2011, producing the eighth-largest bankruptcy in US history and the largest commodity brokerage collapse of all time. While this is not the first time a major brokerage firm has failed, what sets MF Global apart is the fact that $1.2 billion in customer funds were missing at the time of the failure, and still remain missing three months later. This shortfall affects approximately 38,000 futures brokerage accounts, a large percentage of which were held by individuals and entities in the agricultural sector.Posted by Paul E. Peterson Permalink Tweet
