Challenges Facing Commodity Futures Market Participants: The Anti-Speculation Cycle, the RORO Environment, and Position Limits

Professor Scott Irwin of the University of Illinois has argued that there is a reasonably predictable “anti-speculation cycle” due to periodic bouts of inflation and deflation in commodity prices. Therefore, market participants have an obligation to periodically explain the economic role of futures trading and the role of speculators in these markets. This will be the main task of this article. In addition, this article will discuss two other challenges facing market participants: the impact of the Risk On / Risk Off (RORO) environment in managing commodity risk, and the prospects for the imposition of commodity position limits.