The heads of the Chicago Board of Trade and the Commodity Futures Trading Commission have been called before congressional investigators to discuss the recent attempt to corner the market in wheat.
The two are to have been asked to testify next Wednesday before the House Agriculture Committee's conservation and credit subcommittee, which oversees the federal commodity commission.
At the hearing CFTC officials are expected for the first time to provide details of why they sought last week to halt trading in wheat futures for March delivery. That action was blocked by a lawsuit filed by the Board of Trade after a court hearing in which the CFTC declined to disclose publicly the facts behind its decision.
The hearing was called at the request of the subcommittee's ranking Republican, Edward Madigan, who represents a rural Illinois district including some of the biggest corn and soybean growing counties in the nation.
An aide to Madigan said Midwestern farmers are worried about the possibility that speculators are manipulating commodity futures traded on the Chicago Board of Trade.
The Board of Trade's vice chairman, Leslie Rosenthal, in his first public comment on the wheat crisis, yesterday, denied any wrongdoing and said he would not resign from his post.
Rosenthal and Allen Freeman, a general partner in Rosenthal & Co. of Chicago, have been identified as two of the four professional speculators who controlled almost 90 percent of the contracts for delivery of wheat in March. The huge holding put the four in a position to corner the wheat market and deive up the price.
As the second highest elected officer of the exchange, Rosenthal also sat in on Board of Trade police-making discussions on what to do a about the possible manipulation of the market. Board of Trade officials insist Rosenthal did not try to influence the exchange's action.
In an interview with the Chicago Sun-Times, Rosenthal responded to criticism of his role, saying, "As long as I feel I am right and I have confidence that I can do the job, I'll stay."
Rosenthal faces CFTC charges that could ban him from the futures market for allegedly running a nationwide high pressure sales operation selling commodity options by telephone. He and Freeman and 14 other members of their firm are accused of fraud for making false statements to customers.
Yesterday the CFTC made available a warning letter that was sent to Rosenthal and Rfreeman in December, when it appeared there might be an attempt to corner the market for wheat to be delivered that month.
"You are required by law to avoid causing artificial prices either in the futures or cash markets," the Board of Trade official was warned.
"Although this is not an allegation of manipulation, if upon investigation we find that the price of the December 1978 wheat futures are now or become artificial... due to your action or inaction, we may charge you with price manipulation," warned CFTC regional director Robert W. Clark.
Despite the warning, Rosenthal, Freeman and others bought large numbers of contracts for delivery of wheat in March, when supplies of wheat are smaller than in December and the possibility of price manipulation was greater.
Grain industry sources said that the pattern of trading in the December and March futures may indicate potential troubles with the next wheat contract, for May delivery.