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Am I Getting Screwed Again

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Anonymous

Guest
Heck of a state of affairs the country has got into when whenever Government or Big Business makes an annoucement- the first thing that comes to mind is the words of this hog producer- but he's about right...

(“Somehow I’m going to get screwed in this,” emailed my hog-producing farmer-neighbor immediately after the announcement),



As the futures exchanges merge, the lambs are silent



BY ALAN GUEBERT/For the Lincoln Journal Star

October 29, 2006

Nebraska, US



The weakly regulated, Wild West show that has been the Chicago futures markets is poised to become a wilder, more global show now that the Chicago Mercantile Exchange announced it was purchasing archrival Chicago Board of Trade for $8 billion.



The Oct. 17 news caused hearts to skip in New York, London and Frankfurt, other financial centers seeking world domination. Only later did the money chasers figure out that the brassy Chicago deal likely ushers in a new era of buyouts and joint ventures that will consolidate futures and securities exchanges around the world into a mere handful.



Not that the CME-CBOT deal was a surprise; the coupling came about after years of intense competition and years of coy courtship.



It was made possible, however, when both the Merc and Board of Trade abandoned their clubby, private structures in favor of public stock ownership. The CME went public in 2002, the CBOT in 2005.



While the news did not go unnoticed in farm and ranch country (“Somehow I’m going to get screwed in this,” emailed my hog-producing farmer-neighbor immediately after the announcement), it did go unnoticed by farm and commodity groups.



Nary a word of dissent, assent or indifference on the merger of the world’s two biggest agricultural futures exchanges was heard from any mainline ag group.



If ever there was a clear editorial comment on the powerlessness of farmers and ranchers in the farm and food marketplace, that stone silence was it.



Golly, the marriage of the world’s biggest, most active corn, soybean and food ingredient price-discovery and price-setting institution, the Chicago Board of Trade, to the world’s biggest hog, bacon, feeder cattle, fat cattle and cheese price setter in the world, the Chicago Mercantile Exchange, and the American Farm Bureau, the National Corn Growers, the American Soybean Association, the National Cattlemen’s Beef Association and the National Pork Producers Council cannot even cough up one burp or press release among them?



Evidently not, even though Board of Trade hedgers and speculators bought and sold 33 times more soybeans and 12 times more corn in 2005 than U.S. farmers produced, while the Merc hosted the trading of 1.05 billion futures contracts with an underlying value of $638 trillion.



The silence also suggests few in American agriculture will challenge or question the deal when it arrives at the Department of Justice for what already is being characterized as a slam-dunk antitrust review.



Even now, more than a week after the proposed buyout, only one ag group, the Organization for Competitive Markets, is questioning what the deal—with its 23-hours-per-day trading that moves upwards of nine million contracts worth over $4 trillion — means for farmers and livestock growers.



OCM has no answers, but it at least it’s asking. For example:



—What will the unparalleled size of the combined CME-CBOT mean to ag futures and their wholly dependent cash grain and livestock markets?



—Can the Commodity Futures Trading Commission, with a budget one-eighth that of the Securities Exchange Commission, effectively regulate this new futures entity that is 20 percent bigger than the New York Stock Exchange?



—When global ag players complain, as Cargill’s boss did last spring, that price movement on Chicago futures markets often is inexplicable, how long will it be before another 1990s-like scandal again rocks this massive market?



—Will this powerhouse merger give even more cash and futures market clout to food giants such as Tyson Foods and Cargill who already hold dominating stakes in both the livestock and grain markets, cash and futures?



The questions are not esoteric; the answers not an academic exercise. Deals of this size in vitally important, price-setting markets carry sizable impacts and the impacts carry consequences.



Two immediate consequences, according to industry observers, are apparent. First, the lack of competition between Chicago futures markets will increase costs for traders. Typically, those increases run downhill to cash market participants.



Second, today’s rise in around-the-clock, around-the-world electronic trading will doom the traditional, look-‘em-eye trading pits at both the Chicago Mercantile Exchange and the Chicago Board of Trade.



Is this a good or bad thing? It’s hard to know, but someone should at least ask.



Alan Guebert is a freelance agricultural journalist.



journalstar.com
 

mwj

Well-known member
Oldtimer my oldest brother is in on a new 5800 sow operation and that did not even get mentioned at there last meeting. Why didn't you have any CATTLE producing friends bringing up concerns?
 

Econ101

Well-known member
mwj said:
Oldtimer my oldest brother is in on a new 5800 sow operation and that did not even get mentioned at there last meeting. Why didn't you have any CATTLE producing friends bringing up concerns?

Sometimes the negative effects are hard to see. On your brother's 5800 operation, he will see it sooner than most cattlemen just because of the numbers. With the hogs packers in cattle along with the chicken packers in cattle, it really doesn't matter much which of the proteins you are talking about since they are so intertwined. Tyson's Pres. is pres. of the LMA which is all the meats. We will see more coordination with the meats because of these entanglements. They will be bad for the consumers.
 
A

Anonymous

Guest
mwj said:
Oldtimer my oldest brother is in on a new 5800 sow operation and that did not even get mentioned at there last meeting. Why didn't you have any CATTLE producing friends bringing up concerns?

I'm kind of like the hog farmer- I'm not sure how it will affect me- But I got a strange feeling I should be looking for the vaseline...I don't think anyone really knows how this could shake out-- probably the reason it is still being looked at so closely...

I was hoping for Agman's opinion-- Now if he said it was good for him and his "we" group, I'd know I better be running for the drugstore :wink: :lol:
 

Sandhusker

Well-known member
I don't see any problem right now. It's not like the CME and CBOT are in competition - they handle different contracts. For example, the CME has cattle but no corn, and the CBOT has corn but no cattle. It's that way all through all the contracts.

I don't like 24 hour trading and I hope that doesn't expand.
 
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