Study Would Determine if Cheese Trading has Improved Nearly a Decade
After Possible Price Manipulation was Uncovered
July 14, 2006
Washington, D.C.: U.S. Senator Russ Feingold (D-WI) is calling on the
Government Accountability Office (GAO) to study if cheese trading on the
Chicago Mercantile Exchange (CME) is susceptible to price manipulation
and suggest improvements that may be needed. Feingold, along with
Senators Arlen Specter (R-PA) and Hillary Rodham Clinton (D-NY), took
the lead in writing GAO Comptroller General David Walker requesting the
study nearly ten years after price manipulation was uncovered in cheese
trading on the old National Cheese Exchange based in Green Bay, Wisconsin.
"Ten years ago a study found that the cheese trading in Green Bay was
susceptible to price manipulation causing dairy farmers in Wisconsin and
across the country to question the validity of the prices that are
linked to what they receive for their milk," Feingold said. "We need to
determine whether in the past decade since cheese trading moved to
Chicago, improvements have been made or if our dairy farmers continue to
have a reason to be concerned."
In 1996, a report commissioned by the Wisconsin Department of
Agriculture, Trade and Consumer Protection showed that the National
Cheese Exchange, which was then based in Green Bay, Wisconsin, was
susceptible to price manipulation. Feingold has long called for better
federal oversight and in 1997 he offered legislation to reduce the
reliance of milk pricing on the questionable trading at the National
Cheese Exchange. In 1997, that exchange was closed and trading moved to
the CME.
In the letter, the Senators ask for the GAO to explore several issues
including:
How the CME market is currently structured to facilitate price
discovery, fairness and deter manipulation and other abuses
What the risks are of price manipulation at the current CME cheese
market and whether there is any evidence of questionable trading such as
that found in the 1996 report
To what extent the CME has considered to improve its cheese market
based on its own internal analysis or from outside parties
What role, if any, the Commodity Futures Trading Commission or other
federal agencies play in overseeing the CME's cheese market
What changes could be made at the CME or in federal oversight to
improve the market's price discovery, fairness and integrity.
For more background information on the controversy surrounding the CME read more...
