The Rural Voice, 1990-03, Page 38"OUR MARKETS FOR OUR
grain and our cattle and our hogs and
all our commodities are manipulated.
The first time I began to know that
was back in 1979."
John F. Arens, an attorney who
is suing the Chicago Board of Trade,
was speaking at the National Organ-
ization of Raw Materials conference
in Kansas City, Missouri this January.
Arens is the senior partner of Arens
and Alexander, a law firm which em-
ploys 14 attorneys to represent farmers
and ranchers in more than half the
states across America.
On October 29, 1979, he contin-
ued, the largest deliveries in history of
fat cattle were made, bringing down
the cash price and depressing the fu-
tures market. Large weekly deliveries,
Arens said, were made by Cactus
Feeders, which is owned by Revco.
At the same time, he said, Revco held
a short (sold) position in the futures
market. So Revco made more than
$300 million. And individual farmers
lost.
Arens undertook three lawsuits
against Revco on behalf of farmers,
and he won. Circuit court judges
ruled that Revco, with one Tom
Dittmer as chairman of the board,
manipulated the Chicago Mercantile
Exchange.
"I've always thought from that
point forward that all the markets were
crooked," Arens said. "I never under-
stood why we even had futures mar-
kets. I never understood why they
(the government) didn't make them do
it out in Las Vegas if they're going to
do it, why did they let them do it in
Chicago, why did they let them do it
with our corn, and our wheat and our
soybeans."
On another track, Arens quoted
Peter Kooy, a vice-president of
Cargill, as saying at a conference four
years ago: "If the traders, or the mar-
ket participants, don't go along with
us, we get all of our friends to gang
up on them, and we bust them."
The conference transcript, Arens
said, records a farmer saying, "Can
this really happen?", to which Kooy
answered yes. "Wouldn't that be
manipulation?" asked the farmer.
Kooy is recorded to have answered,
"Yes, I guess it would."
MARKETS
AND
THE LAW
John Arens, an American
lawyer, is representing U.S.
soybean growers in an anti-
trust class action suit against
the Chicago Board of Trade.
The case concerns the col-
lapse of the soybean market
in July of last year. The story
of the collapse is complex,
but one conclusion is clear:
farmers weren't the ones to
profit.
by Sharon Rounds
Arens concluded as he waved
the transcript of the conference: "If
people don't believe that Cargill will
manipulate the market, they should
believe it, because a Cargill executive
says they would."
But Arens wasn't in Kansas City
to talk about the past. He was at the
conference to talk about the future.
Arens is representing every American
soybean grower in an anti-trust class
action suit against the Chicago Board
of Trade because, he says, "In July of
1989, another manipulation happened
and that was in the soybean market."
Arens recited events leading up to
the alleged manipulation, waving let-
ters that he has collected in evidence
from the CFTC (Commodity Futures
Trading Commission), the government
agency that ordered Ferruzzi and Co.,
the largest soybean user and trader in
the world, to sell or close its positions
in the market, not just in July, but in
May of 1989 as well.
The collapse of the July 1989 mar-
ket for soybeans caused a stir around
the world. The Chicago Board of
Trade, the centre of the world grain
market, allows trade in future prices of
grain in two different ways. Hedging,
a futures market transaction which
offsets a contract for a commodity, is
the true reason for a future price mar-
ket. Speculation occurs when some-
one sells or buys a futures contract in
the hope that the contract will change
in price and make dollars for the buy-
er/seller. Speculative contracts are
limited to three million bushels per
individual on soybeans. Hedging
contracts are unlimited.
Ferruzzi & Co., which holds
seats on the Chicago Board of Trade
(CBOT), bought soybeans on the
Chicago board for the 1989 months in
which it had contracts with the Soviet
Union for the export of soybeans, and
also for its crushing plants at Central
Soya, the largest consumer of soy-
beans in the U.S.
As one of the world's largest soy-
bean traders and consumers, Ferruzzi
& Co. uses the futures markets at
CBOT extensively to ensure delivery
(hedge). "They didn't even have a
bushel of speculative beans. They
were all legitimate hedged beans, for
their own use or for export," Arens
said, referring to Ferruzzi.
Arens credited David Swanson, the
chief executive officer of Central Soya
(purchased by Ferruzzi and Co. in
1987 from Walt Disney) with fore-
sight in expecting a shortage of soy-
beans in 1989, because of the 1988
drought. In fact, he said, Swanson
was so sure of the shortage that he
published the fact that Central Soya
would be an aggressive buyer and
trader in 1988 and 1989. Arens'
document files show that Swanson's
intentions were announced to the
American public.
Cargill, on the other hand, Arens
said, published data to indicate that the
price of beans in July of 1989 would
be low. As the same time, Cargill and
other merchants held the other (sold)
side of many of Ferruzzi's (buy)
contracts. Commenting that farmers
sold into the market, while merchants,
as a rule, were buyers, Arens fingered
these merchants as speculators. He
highlighted the fact that these large
traders did not actually own the beans
that were "sold" into the futures mar -
34 THE RURAL VOICE