Thursday’s ruling came in a lawsuit in which the plaintiffs had argued that a 1989 emergency order by the CBOT caused November soybean futures to plummet at a time when market forces seemed to be pushing prices higher.
“At the CBOT, we take great pride in the integrity of our markets and members. That is why I am pleased that the completion of the plaintiff’s case in this matter caused Judge Andersen to render a verdict in favor of our exchange,” said Nickolas Neubauer, CBOT Chairman, in a statement issued following the verdict.
Despite CBOT officials’ happiness with Andersen’s ruling, even the judge expects his decision to be appealed. Plaintiff attorneys immediately promised to do that in the 7th Circuit Court of Appeals. They have 30 days to file.
In 1988, the United States experienced a severe drought. A poor crop reduced soybean stocks to a 12-year low. The following year, market prices in east Arkansas were in the range of $7.50 per bushel. Many farmers were still holding 1988 soybeans expecting the prices to go even higher. All indications were prices were heading up due to short supplies up and down the pipeline.
Then, on July 11, 1989, CBOT issued an emergency order. The board claimed the market was artificial and they had to take steps to correct it. CBOT mandated that anyone holding large contracts for soybeans had to liquidate them. When that order was given soybean prices dropped 40 cents almost immediately.
Yesterday, in an odd admission, Andersen wrote that his opinion might be wrong and that farmers really were hurt by CBOT actions in 1989
“First, it is possible that farmers who sold soybeans based on July futures prices in the immediate aftermath of the drastic actions of July 11th, 1989, did get paid less for their soybeans. It does appear that the market was jolted for at least a day or two,” Anderson said.
“And I want to say, also, I could be wrong. I have a duty to do, and I don’t think there could be any reasonable outcome that’s different than this. So, if it turns out that the Court of Appeals disagrees, so be it,” wrote Andersen.
On Thursday morning, Harvey Joe Sanner – one of the plaintiffs and a farmer from Des Arc, Ark. – had yet to hear Andersen’s ruling. But Andersen had dropped hints earlier in the week.
“We were sweating blood Monday because the judge indicated he would rule on CBOT’s request for a directed verdict after we’d presented our case. (A directed verdict is often requested after the plaintiff presents its case. The defense attorneys, in essence, tell the judge the charges against their client weren’t proven and ask him to dismiss the case.) Andersen said he’d rule on the request Tuesday morning and was inclined to rule in favor of CBOT.
“Well, I was physically sick when I heard that. But court started Tuesday and nothing happened. The judge never mentioned his earlier statements, never mentioned why he didn’t rule and court just went on like normal. Here it is Thursday and the trial is still ongoing,” said Sanner.
Plaintiff attorneys rested Monday a week ago. Sanner said he thought the attorneys did a “good job” presenting the case against CBOT.
“But CBOT attorneys are doing a hell of a job with their defense. They keep hollering on and on about the communications they had with the CFTC and how they had no choice but to take the actions they did. They claim there doesn’t have to be an actual threat, that they can act simply because they think there’s a threat to the market,” said Sanner.
After Andersen’s decision, Neubauer said plaintiff charges of CBOT conflicts of interest and artificially depressed cash markets were wrong.
“Both the Commodity Futures Trading Commission, the federal regulatory agency that oversees our markets, and the U.S. General Accounting Office agreed with our taking such action,” he said.