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California Black Agriculture Producers and Global Commodity End-Users Should Participate

by Khubaka, Michael Harris
Black Agriculture remains 1% of the US Agriculture Market and if global Black Agriculture producers do not participate in the Commodity Derivative Markets, leveraged capitalization for sustained market participation will mirror counterparts in the United States. The futures markets began with black stock and today futures markets are available to participate for those prepared to participate. The Commodity Futures Trading Commission has a role and responsibility to articulate understanding that allows greater participation of diverse stakeholders adversely impacted by systemic risk management.
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Commodity derivatives markets have been in existence for centuries, driven by the efforts of commodities producers, users and investors to manage their business and financial risks.

Producers want to manage their exposure to changes in the prices they receive for their commodities. They are mostly focused on achieving the same effect as fixed prices on contracts to sell their produce. A silver producer, for example, wants to hedge its losses from a fall in the price of silver for its current silver inventory. Cattle ranchers want to hedge their exposure to changes in the price of cattle. Food companies need to hedge the risk of price changes in green coffee, cocoa beans, cereals, milk and other commodities they sell.

End-users want and need to hedge the prices at which they can purchase commodities. A hospital system might want to fix the price at which it purchases electricity for air conditioning during the summer. An airline wants to lock in the price of the jet fuel it needs to purchase in order to satisfy the peak in seasonal demand for travel.

At the same time, investors and financial intermediaries can either buy or sell commodities through the use of derivatives. They put capital that is essential to facilitating the business of the producer and of the end-user. They stand ready to transact with these market participants; without them, producers and end-users could not hedge their risks.

Today, the commodity derivatives market is global, and includes both exchange-traded and over-the-counter (OTC) derivatives contracts. It consists of a wide range of segments: agriculture, base metals, coal, commodity index products, crude oil, emissions, freight, gas, oil products, plastics products, power, precious metals and weather.

From Commodity Fact

The United States House of Representatives will consider H.R. 2289, the Commodity End-User Relief Act. Introduced by House Agriculture Committee Chairman K. Michael Conaway (TX-11), Rep. Austin Scott (GA-8), and Rep. David Scott (GA-13), this bipartisan bill will reauthorize and improve the operations of the Commodity Futures Trading Commission (CFTC), as well as ensure robust markets, consumer protections, and a balanced approach to regulations impacting job creators. The House Agriculture Committee approved H.R. 2289 on May 14, 2015, by voice vote.

The following list includes the more than 40 organizations that support H.R. 2289. Letters of support can be viewed here.

Agribusiness Association of Iowa
Agribusiness Council of Indiana/Indiana Grain and Feed Association
American Baptist Churches
American Cotton Shippers Association
American Farm Bureau Federation
American Feed Industry Association
American Gas Association
American Public Power Association
American Soybean Association
Commodity Markets Council
Depository Trust and Clearing Corporation
Edison Electric Institute
Futures Industry Association
Grain and Feed Association of Illinois
Kansas Grain and Feed Association
Michigan Agri-Business Association
Michigan Bean Shippers Association
Minnesota Grain and Feed Association
Missouri Agribusiness Association
National Association of Manufacturers
National Cattlemen’s Beef Association
National Corn Growers Association
National Cotton Council
National Council of Farmer Cooperatives
National Grain and Feed Association
National Pork Producers Council
National Rural Electric Cooperative Association
Nebraska Grain and Feed Association
North American Export Grain Association
North Dakota Grain Dealers Association
Northeast Agribusiness and Feed Alliance
Ohio AgriBusiness Association
Oklahoma Grain and Feed Association
Pacific Northwest Grain and Feed Association
Reform Pensions Board
Rocky Mountain Agribusiness Association
Southeast Minnesota Grain and Feed Dealers Association
South Dakota Grain and Feed Association
Tennessee Feed and Grain Association
Texas Grain and Feed Association
United Methodist Church
US Chamber of Commerce
USA Rice Federation
Wisconsin Agri-Business Association


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