Suddenly and almost unexpectedly, tighter governmental regulation of wheat futures looms at the center of attention for the Obama administration and Congress. In reaction to the amazingly volatile prices in major commodity markets during 2008, thoughtful and thoughtless criticisms have been aimed at futures markets as being responsible for the dramatic fluctuations in crude oil, in financial instruments and, yes, in major grains and oilseeds. But for most of this time, wheat was never the main target of critics urging regulatory changes.

Wheat’s dramatic move to center stage resulted from studies by Congress looking at the role of futures trading, particularly by hedge and index funds, in food price inflation. One outcome of that was homing in on an aberration in Chicago wheat futures — the absence of convergence between expiring wheat futures contracts and cash prices. In Chicago’s case, the spread widened to the point that the exchange itself has been considering, and had begun to implement, a range of actions that promises correction.

Now, the Commodity Futures Trading Commission chairman said he is "looking very closely" at reducing or eliminating waivers allowing index funds to exceed position limits. To the degree the hedging function of futures would be protected, changes should be pursued. Still, everyone involved in this arena needs to avoid grasping on to moves that could do much harm, by cutting into market volume, without doing any good.

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