Farmers Fear Perpetual Trading Will Disrupt Energy Markets

Farmer and commodity groups are warning the Commodity Futures Trading Commission (CFTC) about the potential disruptions of allowing perpetual trading in energy markets. They argue that this would set a precedent for agricultural futures, which rely on traditional expiring contracts and physical delivery commitments to stay tied to cash commodities.

The National Council of Farmer Cooperatives (NCFC), the National Corn Growers Association (NCGA), and the American Cotton Shippers Association (ACSA) are among those opposing perpetual contracts in energy markets. They worry that continuous trading could siphon trading volume away from traditional futures contracts used for hedging, leading to higher costs for farmers and cooperatives.

The NCFC also pointed out that cash bids and basis levels are not updated on weekends, which means a sharp move in futures on Saturday or Sunday could occur without corresponding changes in the cash market. This would make it difficult for farmers to hedge their prices effectively.

Traditional energy companies, such as the American Petroleum Institute and Natural Gas Supply Association, also oppose perpetual contracts, citing increased compliance and operating costs, exacerbating volatility, and imposing additional burdens on commercial hedgers without comparable benefits.