Amid concerns that futures markets are becoming less effective in allowing farmers to manage risk, the American Soybean Association (ASA) has formed a Market Performance Working Group (MPWG) to examine the issues affecting markets and to make recommendations to the ASA Board of Directors on what might be done to improve the situation.

The Working Group consists of ASA Board members Scott Fritz from Winamac, Ind., Ray Gaesser from Corning, Iowa, Ron Kindred from Atlanta, Ill., and Steve Wellman from Syracuse, Neb., and Tennessee Soybean Association State Executive Parks Wells. The Working Group will be analyzing factors affecting markets, interacting with other groups to try to develop solutions, and developing recommendations and positions for ASA’s consideration.

While farmers certainly have welcomed higher prices for their crops, soybean and other farmers have increasingly become concerned about the growing lack of convergence between futures and cash prices, whether fund participation in markets and related volatility has resulted in a larger than normal basis, and the fact that many elevators have stopped offering bids for grain beyond 60 days.

Kicking off the efforts of the new Working Group, Fritz met today in Chicago with representatives from the Chicago Board of Trade, Minneapolis Grain Exchange, Kansas City Board of Trade, CME Group, and the Commodity Markets Council (CMC). The meeting was organized by the CMC and the exchanges to gather input from market participants on how to improve futures market performance.

Topics discussed included changes to delivery procedures, expansion of delivery territory, capping index fund hedge exemptions, and other possible actions or mechanisms to improve market performance.

In his presentation Fritz noted, "Farmers are losing their ability to pass off risk due to lack of convergence between futures and cash prices, the lack of effective delivery mechanisms, and the halting of deferred bids by many elevators. For farmers and other traditional hedgers, we need to improve futures market performance so that they once again can be used as effective hedging tools."

The MPWG also has meetings scheduled on April 8, with the American Farm Bureau Federation in Saint Louis, and on April 22, with the U.S. Commodity Futures Trading Commission in Washington, D.C.