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NGFA – “NO COMPENSATION FOR HEDGING LOSSES”
The National Grain and Feed Association (NGFA) this week delivered a letter to Secretary of Agriculture Edward Schafer in response to remarks attributed to him on Oct. 20 in Iowa concerning the use of federal funds to compensate firms that may have sustained is hedging losses in commodity markets. Following his address at the World Food Prize symposium breakfast on Oct. 17, Schafer said that USDA is considering awarding up to $25 million in rural development funds to ethanol plants that are "under pressure because they've been speculating on corn." NGFA stated that any such action runs severely counter to the free market system, and that the lack of clarity contributes to the impression that USDA is selectively intervening in the competitive marketplace. “Companies that purchase grain for use in animal feed, processing, ethanol production, exporting or for other purposes utilize different approaches in managing price risks for buying whole grains”, said Kendell Keith, NGFA President. “There have been recent news reports of sizable losses on commodity hedging/trading across several industries. However, we know of no reasonable justification for USDA, or any other government agency, picking “winners” and “losers” in the market by selectively choosing which company losses in commodity markets should be cushioned by an ad hoc inflow of taxpayer money versus those that should assume responsibility for their own actions.” The letter went on to urge the Secretary to let the competitive marketplace do its job without ad hoc government intervention and manipulation and, given the widespread reporting of his remarks, that USDA promptly clarify policies on appropriate and inappropriate use of funds allocated to the referenced program.
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