Carl Levin

And we have shown the correlation between the huge influx of money from the index funds to the increase in the futures prices.

But the volatility in the basis has had an effect on you.

Well, I am not sure I understand your explanation as to why you disagree that the storage cost shift cannot explain this increase in the gap between futures and cash prices. Try it again.

I am not sure I understand your explanation as to why you disagree that the storage cost shift cannot explain this increase in the gap between futures and cash prices.

The problem is that there is an embedded option inside of the futures contract for below-market cost of storage.

It is a predominant factor, yes.

Well, thank you all very much for your testimony.

Should you decide to impose the standard position limits, what is your response to that argument?

If elevators are hurt, because they cannot effectively hedge, is it fair to say that farmers who deal with those elevators would also be hurt?

Exchanges typically charge a transaction fee and a clearing fee for each commodity trade that takes place.

But you have the authority, should you decide to issue that rule?

I think that we have the clear authority to do it as it relates to the two no-action letters.

All right. Again, I would say that in their prepared statement, prior to being approved by CME, they say all index traders were required to receive prior CFTC approval.

And when are you going to be deciding whether to carry out that mandate--in other words, remove the exemptions, remove the waivers?

Do you believe that the dramatic increase in commodity indexed trading and the futures which are purchased to hedge against a risk, has played a significant role in the failure of convergence?

As to the issue of price convergence, a competing theory which has been offered for why there is a lack of price convergence is that the Chicago wheat contract is flawed.

Our report concludes that the increase in the number of futures contracts from 30,000 contracts in 2004 to 220,000 contracts in 2008 has created this additional demand for futures contracts unconnected to and without parallel in the cash…

Hedging in the futures markets only works to the extent that the price of the commodity in the cash market and the price of the commodity in the futures market converge as a futures contract expires.

Ultimately, it is the American consumer who will bear the burden of these increased costs.

The continued lack of convergence in important segments of the wheat market has significantly diminished the usefulness of the wheat futures market for commercial hedgers.

The Subcommittee's report on excessive speculation in the wheat market is a very important contribution.

It is harder to hedge risk today than it was 10 years ago.

Farming is risky business. It is a notoriously thin margin the people in the food industry have.

As the Ranking Member of the Appropriations Subcommittee for Financial Services, I joined with Chairman Durbin to increase funding for the CFTC to $177 million--an increase of 10 percent over the President's fiscal year 2010 request.

I have introduced the Commodity Speculation Reform Act.