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Senate Subcommittee Report on Wheat Futures Speculation Doesn't Prove Any Point

2 understand this "puzzle", u 1st need 2 understand wheat contract delivery specs: (1) delivery houses don't delivery wheat, against (short) futures, they delivery delivery certificates. (2) folks (w/ long futures positions) who stop delivery certs have the right but not the obligation to convert them in2 wheat by ordering load out. (2) delivery houses that issue delivery certs have the obligation but not the right 2 convert them in2 wheat by loading out. Delivery elevators can delivery certs until hell freezes over, but can't force the stoppers 2 convert them in2 cash wheat by ordering load-out. Stoppers can pay for their certs & hold them (paying "storage") 4 either later conversion in2 wheat (load out) or later re-delivery against futures. If positive futures carries cover carrying costs & offer an attractive rate of return (full carry) delivery against deferred futures is a valid market 4 certs & there's no reason conversion in2 wheat ever needs 2 b. W/out conversion, convergence isn't assured. there's pretty good assurance that futures won't be far belo cash (a very high basis) as contracts expire because conversion will pay if that's the case. but there's no assurance that futures won't b far above cash (a very lo basis). there are several possible simple changes 2 the contract that would leave conversion as the only valid market for delivery certs & assure convergence. none of them involve running speculators or hedgers out of the futures market.