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Published July 21, 2009, 05:55 AM

Letter to the editor: Commodity futures help avert problems

Commodity prices have tumbled recently. But what most people don’t know is it isn’t from a market factor, but a government factor. The Commodity Futures Trading Commission wasn’t doing what Sen. Byron Dorgan, D-N.D., wanted done, so the leader was replaced.

By: Eugene Graner, Bismarck, N.D., The Jamestown Sun

Commodity prices have tumbled recently. But what most people don’t know is it isn’t from a market factor, but a government factor. The Commodity Futures Trading Commission wasn’t doing what Sen. Byron Dorgan, D-N.D., wanted done, so the leader was replaced. It’s funny how speculation is called manipulation when the end result is not appealing to your needs. So the new leader at the CFTC says there is a problem with commodities and wants to put limits on how many contracts index funds may own. How idiotic and un-capitalistic to limit people’s potential to legally profit in this country as they have for 150 years at the exchanges.

These people should talk to people in the trenches in this business. Commodity futures don’t cause problems; they help avert them by seeing an oversupply or a shortfall in a commodity before we run out, thus reducing the chance of running out of that commodity by bringing profitability to the producer with plenty of lead time.

The answer to the new large index funds is very simple. Bona-fide hedgers and small speculators continue to put up 5 percent margins on commodities, like they buy stocks, and that is to put up 50 percent margins.

This means the higher the market goes, the more they have to put up if they want to make continual purchases. If they feel the market still has value at the elevated rates, they know they have to come up with more money to continue purchasing. They also have to consider the ramifications of buying into commodity futures that require you to liquidate at a finite date. Dorgan wants to be a hero and play Robin Hood, when if fact; he is stealing from the agricultural and energy industry of North Dakota.

Take a pencil and calculate a $1 per bushel lost on wheat alone in North Dakota in total value over the past month, as well as the value lost in oil per day, and you will see Dorgan has stolen quite a bit from his constituents. Some may think this is a heartless capitalistic remark. What the socialists that rebut this are jealous of, is what a waste of profit that many individuals of North Dakota have made from energy and grains that had went on to provide new jobs and a robust economy that is the envy of the nation with an overflowing state coffer.

The socialists would have rather seen higher energy and food prices come from “cap and tax” so the government could have made better use of those gains. Karl Marx must be smiling in his grave, knowing there are people out there still believing in his cause.

Eugene Graner

Bismarck, N.D.

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