MINNEAPOLIS (AP) -- The shock waves from the collapse of commodities trading firm MF Global Inc. are hitting hard across rural America, where farmers, ranchers and agricultural business owners are nervously waiting to learn how much money they’ve lost.
Many of the farmers who traded with MF Global, which is being investigated over what federal regulators say is an estimated $1.2 billion that may be missing from customer accounts, used the futures markets to reduce the risks of volatile prices. Locking in prices through the futures market -- something farmers have been doing for a century -- allows them to plan ahead while knowing what their costs will be.
Mike Mouw, co-owner of Mouw’s Feed and Grain Inc. in the southwestern Minnesota town of Leota, said his business relies on the futures markets both when it buys grain from farmers and when it sells feed to hog producers. That makes it possible to for the company to plan two or three years ahead. Now, though, Mouw estimates he’s out about $250,000.
“I’m praying that I get it back,” he said.
Farmers, ranchers and rural businesses such as grain elevators and feed mills were among the hardest hit when they were cut off from the cash in their hedging accounts at MF Global, which sought bankruptcy protection in October after making a disastrous bet on European government debt. The number of people harmed and the extent of their losses isn’t clear yet.
“This thing should not be taken lightly by anybody,” Mouw said. “This has a far greater trickledown than people realize.”
Federal regulators are investigating whether MF Global, as its financial condition worsened, tapped client funds that were supposed to be kept safe in strictly segregated accounts. They’re also trying to determine what became of the money -- it’s not clear if the cash is parked somewhere or if it’s gone. Violating the rules for segregated accounts can lead to civil and criminal penalties.
The chairmen of the Commodity Futures Trading Commission and the Securities and Exchange Commission said Thursday that all those affected should get back at least two-thirds of their money.
Dean Tofteland, who raises corn, soybeans and pigs near Luverne in southwestern Minnesota, has about $200,000 tied up with MF Global, said Sen. Amy Klobuchar at an Senate Agriculture Committee hearing. She said his situation shows how the firm’s $6.3 billion bad bet on European bonds is being felt in small towns across America.
