Anthony Tancredi, vice president with Allenberg Cotton Co., said the cotton industry finds itself "on the precipice of dysfunction, courtesy of the extreme movements in ICE (International Cotton Exchange) futures caused by index funds and speculative activity."
As a number of witnesses pointed out during the House Agriculture Committee hearings, the futures markets were originally created to help provide price discovery and risk management for agricultural commodities.
Over time, the futures market concept has been expanded to include other commodities, including oil and gas, precious metals and now even carbon credits, a new environmental area where trading is just beginning. "This purpose has been shoved aside by big money flowing into commodity markets purely as a speculative investment," said Tancredi, a past president of the Texas Cotton Association.
said the rush of index and hedge fund money into the commodity markets has upset the traditional relationship of the cotton trade and speculators. (Most experts believe speculators play a needed role by helping provide liquidity for the commodity markets.)
"It is completely backwards to have the industry affected by speculative interests instead of the opposite," he