Pork producers depend on risk-management tools, including futures contracts, to deal with the volatility in feed grain and hog prices. In the wake of the MF Global bankruptcy, and in written testimony to the Senate and House agriculture committees and to the House Financial Services Committee, the National Pork Producers Council said most producers were unaware of their connection to MF Global and were stunned to learn in early November, when the clearing broker filed for bankruptcy, that their futures accounts were frozen and funds were "missing."
According to the NPPC, pork producers who produce at least 20% of U.S. hogs had funds with MF Global. Most, if not all, of them, however, did not deposit their funds directly with the clearing broker. They opened futures trading accounts with an "introducing" broker, which put the funds into MF Global. Now, as much as $1.2 billion of those customer funds may have been comingled with MF Global money and used to buy risky European debt.
NPPC has many questions of those investigating the MF Global bankruptcy and wants to know what preventative measures were offered and may ask for more preventative measures to be instituted. Some of their suggestions include: impose stiffer criminal and/or civil penalties for misuse of customer accounts; require brokers to obtain permission before using customers' funds for purposes other than customer transactions; and extension to commodities exchange customers insurance similar to that provided to securities investors through the Securities Investors Protection Corporation.