The Rural Voice, 1990-03, Page 39kets. At that point, he said, the beans
were held by farmers.
And David Swanson was right; the
supply of soybeans was at its lowest
point in 12 years. July figures indicate
the U.S. had only 3 1/2 weeks of sup-
ply. There weren't enough soybeans
to cover the futures market contracts.
But the traders were banking on being
able to buy enough from farmers to
cover their "short" or sold positions,
Arens said.
In May of 1989, Ferruzzi had con-
tracted to receive 19 million bushels,
which it would deliver for export or
for crushing. In the telephone logs
and mail logs which were given into
evidence at the Senate investigation
into the Chicago Board of Trade after
the July 1989 events, telephone calls
between large grain traders and the
Commodity Futures Trading Commis-
sion (a government body charged with
the supervision of the CBOT and other
futures markets) are recorded: "Had
conversation with large grain mer-
chant who expressed concern about
the July soybean liquidation." Day
after day, the CFTC telephone logs
show conversations with large grain
merchants, Arens said.
Letters that went back and forth
between Cargill executives (including
Peter Kooy) and the CFTC are also
available, he said. These letters out-
line concerns about the large long
(buy) position of Ferruzzi in the
futures markets. From the amount of
paper that appears to be in evidence,
Arens said, many letters must have
been asking the CFTC to "do some-
thing about that long position that
Ferruzzi has."
The CFTC, which is headed by
the Secretary of Agriculture, Clayton
Yeutter, complied with the large grain
merchants who were appealing for
assistance in liquidating Ferruzzi's
position, Arens said. The CFTC or-
dered Ferruzzi & Co. to liquidate its
position in the May market (a hedge
of 19 million bushels) to a maximum
of 3 million bushels of soybeans.
Ferruzzi's hedges, in effect, Arens
said, were being called speculation.
Ferruzzi complied with the CFTC
order and sold its futures position in
an orderly manner so that it would not
cause a panic in the soybean pits.
Arens had few kind words for
Yeutter. He referred to him as "our
wonderful secretary of agriculture
who, it wouldn't surprise you at all,
used to be the head of the Chicago
Mercantile Exchange, and coincident-
ally at the same time that old Tom
Dittmer manipulated the last time, and
he (Yeutter) was sure then that they
weren't manipulated either."
The reason for the action in May
was detailed in the letter logs of the
CBOT, CFTC, and Cargill (filed at
the Senate investigation). In different
words, but expressing the same
thought, the letters recorded the intent
"to avoid a default" in the market,
Arens said.
Again, on the 11th of July, 1989,
the CFTC ordered Ferruzzi by letter to
liquidate the company's position in the
July market. Documentation, Arens
said, indicates the same degree of
pressure from the large traders to
obtain this order.
And Ferruzzi began, once again,
to liquidate its position of 20 million
bushels. It had contracts to fill, so it
offered good prices on the cash market
and took delivery of millions of bush-
els of soybeans, at the same time
liquidating its position on the futures
market in an orderly manner. The
price didn't change appreciably on the
July market, Arens said, and the other
merchants who held the offsetting
transactions were losing money on
their speculative positions.
Also on July 11, the CBOT pub-
lished an order for Ferruzzi to sell 20
per cent of its position on each of the
next five days. The law requires that
if the CBOT makes this type of order,
it must be publicized. An order from
the CFTC does not require publica-
tion. The headlines began to shout the
story the following morning. "Italians
attempt to corner soybean market."
The market reacted. It dropped
like a stone — $1.50 in the next five
days. The Senate inquiry established
that most of the members on the
Chicago Board of Trade were in
possession of short positions which in
total netted them some $8 to 9 million.
Ferruzzi had lost in May, Ferruzzi
would lose again in July, Arens said.
It sought a restraining order from the
courts, but was turned down.
The farmers who held the soybeans
to this point, knowing that stocks were
low, watched their price drop. The
largest monthly drop in five years oc-
curred from July 11 to August 1, 1989.
Ferruzzi lost. The farmers of the U.S.
lost. Arens contends that at a time
when the market should have gone up,
action was taken strictly to manipulate
the cash price of soybeans so that the
large traders could buy from farmers
at a low price to sell into the export
market. Arens calls this "cracking"
the market.
"They don't care about the
farmers. They only do it for profit.
People mean nothing to these guys,"
he said.
Reminding the crowd of his past
cases, and quoting from a trial manu-
script, Arens credited Tom Dittmer
with a laughing remark suggesting
that farmers would have to sell their
pickup trucks to feed their cattle after
the 1979 manipulation. Arens said he
is appalled by the contempt that huge
traders seem to have for the farmers
who grow the commodities in which
they trade.
"Never before in the history of
commodity markets," he added, "has
a group of farmers sued the exchange.
Individual farmers have suffered
losses and sued to recover, but a class
action is plowing new ground." Soy-
bean farmers, with co-operation from
the American Agriculture Movement,
are sending in their contributions to a
trust fund to enable every soybean
grower in the U.S. to be a part of this
action, he said. With 430,000 growers
in the U.S., each farmer's share of the
cost would be about $1. Arens added
that the American Soybean Growers
Association, a group he said should be
representing farmers, will have noth-
ing to do with this action.
In a private interview after his
speech, Arens wondered why he had
not been contacted by the Canadian
soybean growers. "They were hurt
too!" he said. "If I could get some
contact with them, maybe it might be
worthwhile for them. After all, we are
in a free trade situation now."
When contacted for comment on
the Arens suit. the Chicago Board of
Trade refused to participate in any
discussion about the matter.0
MARCH 1990 35