The whole story is just a mess. Lots of farmers use derivatives to hedge against ups and downs in the markets. In fact, that’s why derivatives were invented. Most are already traded on exchanges and aren’t affected. And the rest, for farmers, are specifically exempted, as the Journal itself reports—sort of:

Faced with intense lobbying, Congress partially exempted businesses that use derivatives for commercial purposes. So, farmers and co-ops probably won’t face new collateral requirements, for instance—although there remains a dispute over that section of the bill.

What dispute? We’re not told.

Edmund Andrews says to that graph:

Say what? Farmers and other end-users are exempt from the new rules? Then why are we being subjected to this article?

The truth is that the only players who most certainly stand to lose are the big banks, like JP Morgan Chase and Goldman Sachs, that will have to either spin off their derivatives-trading operations or put them into separate subsidiaries that require higher capitalization.

Megan McArdle says this:

I’ve seen no indication that farm futures are going to be harmed by derivatives regulation, and the rest of it consists of saying, basically, “Some people are worried that they might not be able to get loans.” By that logic, plane tickets to Vegas are an equally big problem for farmers.

And Andrews calls it “hack journalism” and “bogus propaganda.”

It’s certainly not the paper’s finest hour.


Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.