By: JOHN E. PECK, executive director, Family Farm Defenders
Captimes (Madison, WI) – Sunday, August 14, 2011
Joel Greeno gets up early each morning to milk his 48 cows in the rolling hills near Kendall, Wis. He’s a young farmer by U.S. standards, still in his 40s, with a new baby, a small daughter and a wife who also works off farm to help make ends meet. He’s proud to be his own boss and works hard to preserve his independence, grazing his cows on pasture as much as possible to limit feed costs and rejecting synthetic chemicals and expensive biotechnology that would contaminate his milk and the land.
Like every farmer, Joel worries about the weather. But an even larger force beyond his control that threatens to destroy his life every day is the unprecedented market power of agribusiness and the reckless commodity speculation that occurs behind closed doors.
Just 250 miles southeast of Kendall, a small trading elite also heads to work each day in Chicago — their job: trying to beat the market on everything from soybeans and carbon credits to fertilizer and timber. Founded in 1898 as the Chicago Butter and Egg Board, the Chicago Mercantile Exchange (CME) has since grown into the world’s largest privatized trading clearinghouse. In 2002 the CME began issuing its own stock, and by 2007 acquired the Chicago Board of Trade (CBOT) for $8 billion as one of its designated contract markets (DCMs).
Within a year, the CME Group bought out another rival, the New York Mercantile Exchange (NYMEX) for $8.9 billion, and later absorbed the Dow Jones Indexes. By the end of 2008, the CME was posting over $2.5 billion in annual revenue, handling over a billion contracts worth $1,000-plus trillion dollars.
While some bidding is still done by humans in the “pit,” over 70 percent of CME trading is now quietly conducted by algorithms through its Globex electronic platform. Craig Donohue, the current CEO of the CME, took home almost $44 million in compensation over the last five years, which — according to Forbes — places him among the wealthiest 400 Americans.
To make matters worse, not just agriculture commodities, but farm land itself has become the latest “hot” commodity for these speculators. In fact, investments in farm land since the 1970s have yielded higher average returns (12 percent plus) than the S&P 500, which is why hedge fund managers, carbon credit traders, and other financial carpetbaggers are flocking to gobble up farmland in the U.S. and across the globe. According to a June 2011 expose by GRAIN, even U.S. pension funds like TIAA-CREF and CalPERS are now jumping on the land-grabbing bandwagon. The retirement of a rural school teacher will soon depend upon bankrupting the future of the farm kids in their own classroom.
Century-old legislation such as the 1890 Sherman Anti-Trust Act and the 1922 Capper Volstead Act have much to say about racketeering and other unfair market practices, but are seldom enforced in a setting like Chicago. In fact, who has ultimate authority over the CME appears rather murky. The Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CTFC), the U.S. Dept. of Justice (DoJ) and the Illinois attorney general all have a regulatory finger in this lucrative pie. The CME, though, remains first and foremost a private corporation with its primary interest being to its shareholders — and these shareholders enjoy much political influence within the hallways of Washington, D.C.
According to the U.S. General Accounting Office (GAO), on any single day just two traders account for two-thirds of the CME spot market for block cheddar, which accounts for less than 2 percent of the total cheddar cheese output in the U.S. Yet this CME cheddar trading is used by the USDA to determine the fluid milk price for Joel and every other dairy farmer in the country. In economic terms this is a “thin market” and an ideal scenario for profiteering. Within the black box of the CME, the tail literally wags the dog, affecting the lives of billions of farmers and consumers across the globe.
Back in 2008, the Commodity Futures Trading Commission found Dairy Farmers of America (DFA) and its two top CEOs guilty of manipulating U.S. milk prices through the CME cheddar market, and fined them $12 million. And in 2009 the DoJ blocked Deans Food’s buyout of Foremost Farms, arguing it would create a quasi dairy monopoly in Wisconsin and other parts of the upper Midwest. Other ongoing investigations of insider trader shenanigans at the CME have languished in limbo for years.
Which is why last year hundreds of family farmers, consumer advocates and others testified at a series of workshops hosted by the U.S. Dept. of Justice and the U.S. Dept. of Agriculture (USDA), focusing on creeping corporate control of the U.S. food system. Joel Greeno was among those who spoke out against Monsanto’s seed monopoly in Ankeny, Iowa, on March 12, 2010, and again about price rigging by the dairy giants (Deans Food, DFA, Kraft, Land O’Lakes) in Madison on June 25, 2010.
Despite a rising epidemic of farm foreclosures and even some farmer suicides blamed on chronic below cost of production prices, the DoJ and USDA have yet to take any substantive action based upon all the compelling evidence they gathered.
Like the “vulture funds” that have long preyed upon economic crises in poorer countries of the global south, the same predatory financial tactics have now come home to roost in America’s heartland. As long as federal regulators and elected officials remain asleep at the wheel and allow commodity speculators to profit from rigged markets at the CME, the hope of Joel Greeno and many other family farmers for a fair price for their hard work will remain but a cruel daydream.
