March 29, 1979
Page 6796
S. 770: BAN FUTURES TRADING ON POTATOES
Mr. MUSKIE. Mr. President, for the past several years, Senator CHURCH has introduced legislation to eliminate the trading of potato futures. I am joining him in that effort.
Maine farmers have said for years that futures trading has been subject to manipulation and has created a market which does not accurately reflect actual supply and demand.
These suspicions are not unfounded. I can recite a litany of problems which have occurred over the past few years. For example. there was manipulation of the price of the May 1971 potato futures on the Chicago Mercantile Exchange.
In May 1976, a major default occurred on the New York Mercantile Exchange. Serious violations of the exchange's rules as well as the violations of the Commodity Exchange Act occurred, and, as a result, the Commodity Futures Trading Commission (CFTC) had to suspend several individuals from trading. Of course, the individual that had to absorb the economic loss was the Maine producer. The result was severe economic loss to the growers in Aroostook County.
Most recently, just 2 weeks ago, at a meeting called at night, the New York Mercantile Exchange Board of Governors suspended trading on the April and May potato futures contract. Without question, this unprecedented halt in trading will have a tremendous adverse impact on the Maine potato industry. In addition to incurring substantial losses, the industry's cherished reputation as one of the Nation's leading producers of quality potatoes, has been unfairly tarnished by these latest difficulties with the potato futures contract. As one Maine farmer put it, "Maine farmers are caught in a battle between the bulls and the bears."
Equally discouraging has been the severe economic difficulties the farmers face as a result of extremely low prices on the cash market. Combined, these factors have persuaded the majority of farmers that futures trading does not serve their best interest, and that other market systems must be considered.
The farmers have stated their wishes by resolution through the National Potato Council and the Maine Potato Council that abolition of futures trading is in the best interest of the potato producers and the entire potato industry.
Under these circumstances, I am pleased to again support this legislation. This bill provides a useful vehicle to examine the impact of futures trading on the market and will give those on both sides of the question an opportunity to present their views and offer alternatives.
I ask unanimous consent that an editorial from the Maine Sunday Telegram of March 18, 1979, entitled "Dump the Futures" be printed in the RECORD.
There being no objection, the article was ordered to be printed in the RECORD as follows:
[From the Maine Sunday Telegram, Mar. 18, 1979]
DUMP THE FUTURES
The belief that speculative trading in the future price of Maine potatoes ought to be banned continues to grow. For the second time in three years there is concern the potato market may have been manipulated.
In 1976 the failure of potato speculators to deliver 50 million pounds of Maine potatoes as promised produced the largest default in the history of the New York Mercantile Exchange.
Last week the exchange ended trading in April and May futures claiming there weren't enough quality Maine potatoes to fulfill the contracts.
Both Maine senators, Edmund S. Muskie and William S. Cohen, immediately asked for an investigation to determine if "criminal misconduct" might have been involved it the latest escapade. Their concern is welcomed but we would have been happier still if both men had devoted their energies during the past two years to building support for a total bar to Maine potato futures trading.
Despite the general support of Aroostock potato farmers for a continuation of future trading, there is growing evidence that we'd be better off without it. It can be argued that futures trading wildly distorts prices over the short term, reduces farmer prices over the long term, and invites attempts at market manipulation by speculators who have never seen the inside of a potato house.