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[Dome]Interim Calendar and Briefing

December 31, 1996

Contents:
Calendar of Scheduled Meetings
Agenda Information Regarding Scheduled Meetings
BRIEFINGS - Information Regarding Recent Meetings

Calendar of Scheduled Meetings

Monday, January 6, 1997
ADMINISTRATIVE RULES REVIEW COMMITTEE
10:00 a.m., Room 118
Tuesday, January 7, 1997
ADMINISTRATIVE RULES REVIEW COMMITTEE
9:00 a.m., Room 118
FISCAL COMMITTEE OF THE LEGISLATIVE COUNCIL - (TENTATIVE)
10:00 a.m., Room 22
Wednesday, January 8, 1997
Iowa Administrative Procedures Study Committee
10:00 a.m., Room 116

Agenda Information Regarding Scheduled Meetings

Administrative Rules Review Committee

Co-chairperson: Senator Berl E. Priebe
Co-chairperson: Representative Janet Metcalf

Fiscal Committee of the Legislative Council - TENTATIVE

Co-chairperson: Senator Larry Murphy
Co-chairperson: Representative David Millage

Iowa Administrative Procedures Study Committee

Co-chairperson: Senator Tom Vilsack
Co-chairperson: Representative Janet Metcalf

BRIEFINGS - Information Regarding Recent Meetings

HEDGE TO ARRIVE CONTRACTS STUDY COMMITTEE

December 20, 1996; Second of Two Meetings

Overview.
The Hedge-to-Arrive Study Committee meeting was held in the Iowa State University Memorial Union in Ames, Iowa. The meeting was called to order at 9:00 a.m. by co-chairpersons Senator Kibbie and Representative Teig. The Committee was presented testimony from a number of persons.
Federal Agency.
Mr. Paul Architzel, Chief Counsel of the Division of Economic Analysis of the Commodity Futures Trading Commission (CTFC), discussed regulation by the agency and enforcement proceedings brought against a number of persons. He presented background information regarding the CTFC, the federal Commodity Exchange Act, hedge-to-arrive (HTA) contracts, and problems associated with their use. He stated that a determination whether a contract falls within the scope of the agency's jurisdiction depends upon the specific facts involved in the transaction. Mr. Architzel discussed a number of guidelines that the CTFC considers when determining whether a HTA contract adheres to principles of prudent risk reduction, including requirements related to ensuring timely delivery of crops based on a producer's annual production capacity.
Financial Aspects.
Dr. Neil Harl, Professor of Economics, Iowa State University, discussed implications related to HTA contracts. He discussed characteristics of HTA contracts and financial problems that have been associated with their use. Dr. Harl was critical of the manner in which contracts were drafted and suggested that the Committee review regulations to ensure that there is a proper degree of oversight regarding the terms of those contracts. He also discussed tax consequences associated with the use of the HTA contracts, noting that hedges produce ordinary gains and ordinary losses and are not typically subject to the loss deferral rules applicable to speculative transactions.
Office of Attorney General.
Mr. Stephen Moline, Mr. Stephen E. Reno, and Mr. Eric Tabor representing the Attorney General's Office, discussed legal aspects of the HTA contracts. Items of discussion included a summary of laws of other states and particularly Indiana which recently enacted measures to regulate HTA contracts. The Indiana law imposes registration requirements upon persons engaged in the business of advising producers on grain marketing. It also requires that a notice be provided in each contract other than a flat price contract, stating that risks may be involved in the transaction. There was also discussion regarding CTFC regulation and enforcement proceedings brought against a number of persons involved in those transactions outside Iowa.
Grain Elevators.
The Committee heard from a number of persons representing elevators involved in litigation regarding HTA contracts, including Mr. David Milbrandt, President of the Farmers Cooperative Elevator in Buffalo Center, Mr. Joseph Goche, a board member of the Farmers Cooperative Elevator in Buffalo Center, Mr. Ray Smith, a member of the Farmers Cooperative Elevator in Buffalo Center, and Mr. Daniel Beenken, General Manager of the Farmers Cooperative Society at Wesley. The presenters stated that in previous years producers received profits under HTA contracts because elevators honored their obligations, producers were aware of the terms and conditions of the contracts, and producers should be expected now to comply with their contractual obligations.
Producers.
The Committee invited members of the public to share their views. Mr. Scott Buchanan, an attorney representing producers, offered perspectives from producers involved in litigation.
Committee Discussion.
The Committee decided to further consider the issues, and meet again during the next legislative session.

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