Lukken offered the Committee a report prepared utilizing detailed information CFTC obtained after it issued a "special call" - a request for information - from swap dealers earlier in the year in an attempt to determine whether index traders were being properly classified for regulatory and reporting purposes.

Lukken's testimony included a summary of the data collected and a number of recommendations, ranging from creating a new swap dealer classification for reporting to the CFTC to beefing up the regulator's staff resources, including creating an office of data collection. These data and recommendations were elaborated upon in the full, 70-page report, which also included the dissent of one commissioner, Bart Chilton.

Though Lukken's recommendations to the Committee centered heavily on greater
reporting and transparency, he did not say speculation was the cause of recent commodity price run-ups.

The general consensus seemed to be that the report provided more information than had previously been available, but didn't offer all the necessary information.
Rep. Bob Etheridge (D-N.C.), the chairman of the General Farm Commodities and
Risk Management Subcommittee and the hearing on Thursday, said he has asked
the CFTC to examine rises in commodity prices before this year and the fall in prices in recent months.

Thursday's hearing was the latest in a series of hearings by the Committee and consultations with industry in an effort to get a grasp on the intense fluctuations and run-ups seen in commodity markets this year.

Last week, the CME Group asked the CFTC to approve a number of changes to its
wheat futures contract intended to increase convergence between cash and futures
prices. NAWG reported on the proposed changes in last week's newsletter and is
preparing comments for the agency.

To read Lukken's full testimony, click here.

Specifically, the groups said they believe USDA is authorized under laws like the
Commodity Credit Corporation Charter Act to establish a temporary loan guarantee program that would ensure efficient marketing of farm commodities in the event of liquidity problems.

Such a temporary program would provide loan guarantees to qualified financial institutions lending to grain and cotton hedgers and other agribusiness entities.  With these guarantees in place, lenders would be better able to provide greater levels of financing to grain and cotton hedgers, allowing them to continue to offer forward contracting arrangements and farm supply input financing to producers.

The rapid escalation of commodity prices and farm input costs this summer forced
many grain handlers to double or triple their borrowings to ensure hedges were maintained in the futures markets. Increased borrowings, in turn, placed significant pressure on company balance sheets and negatively affected availability of forward contracts for U.S. farmers.

Though prices have come down since earlier in the summer, large harvests are expected this fall and any market disruption, like an early frost, could cause prices to spike. That, combined with greater financing needs of growers who are facing enormous input costs increases, could cause a liquidity crunch in the agricultural marketing chain.

Signatories of the letter, in addition to the National Association of Wheat Growers,
included American Farm Bureau Federation; American Soybean Association; National Corn Growers Association; National Cotton Council; National Council of Farmer Cooperatives; National Farmers Union; National Grain and Feed Association; National Sorghum Producers; US Rice Producers Association; and USA Rice Federation.

If the projected production of 67.02 million metric tons, or 2.46 billion bushels, is achieved, U.S. farmers would produce more than 19 percent more in the 2008/2009 crop year than the 2007/2008 crop year. 

World production estimates for 2008/2009 were shown up by 5.5 million tons (202.1 million bushels) from last month, for a total record production of 676.3 million tons (24.85 billion bushels), or just less than 11 percent higher than last year's global production.

The report also showed increased world wheat imports and exports for 2008/2009, mainly reflecting increased supplies of feed quality wheat and increased prospects for wheat feeding. Competitively priced feed quality wheat reduces corn feeding, with increased supplies of lower quality wheat in EU-27, Russia and Ukraine also boosting wheat feeding and exports.

At 139.9 million tons, stocks are expected to be up 21.4 million tons, or about 18 percent.

"The demand for high-quality, hard wheat is growing every year," says Dick Prior, Regional Vice President for the Middle East, East Africa and North Africa with U.S. Wheat Associates (USW). "Yes, the world supply of wheat is up but more than 60 percent of that is soft wheat. The U.S. along with Australia and Canada are the primary sources of quality hard wheats and the U.S. is the most reliable supplier to more buyers."

Sales of U.S. hard red winter (HRW) so far in marketing year 2008/09 back up the demand factor. USW Market Analyst Ian Flagg reports in this issue of Wheat Letter that at 7.8 million metric tons (MMT), U.S. HRW exports exceed 60 percent of U.S. Department of Agriculture (USDA) estimates for the entire year. USDA also recently boosted its forecast of U.S. agricultural exports for fiscal 2008 (October - September) by $5.5 billion from its May estimate in part because of "stronger demand for U.S. wheat, soybeans, pork and dairy products."

"Asian buyers are also importing more hard wheat because consumers in growing local economies are adopting Western-style diets," says Wataru "Charlie" Utsunomiya, USW Country Director in Japan. "This is true even in countries like Indonesia and Malaysia."

Joe Sowers, USW Assistant Regional Director for Mexico, Central America and the Caribbean, says that in today's market environment, the value of reliability is more important. "Global buyers were able to source wheat from the U.S. last year when other exporters turned them away," Sowers notes.

Wheat prices in the U.S. and around the world are trending down as traders react to the large global crop and the recent softening of commodity prices. Early this week, bread wheat from Black Sea ports was priced for export at only about five percent less than U.S. HRW. Additionally, USDA's first forecast of U.S. agricultural exports for fiscal 2009 predicts wheat sales will decline as supply outside the U.S. grows.