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| Gentlemen--When the delivery process changed a few years ago, the concept of "convergence" (coming together of cash and futures at or near the end of trading on futures contracts) was for all practical purposes eliminated. Secondly, when the CFTC (Commodity Futures Trading Commission) made the decision to allow non commercials to have virtually unlimited position limits we made the futures market an impossible place for the true hedge function to mean anything any longer. As a result, your ability to hedge cash grain is not what it used to be. The only way we get convergence back into the playing feild ( and thus the true traditional hedge relationship) is a very complex problem. I served on the CBOT delivery committee for many years in the 80's and early 90's. We lost the concept of convergence when we lost the regional grain companies and were left with a handful of major processors who really do not care for traditional concepts. The bottom line is when you follow the money you will see what evolves in markets. | |
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Wheat basis
