The Commodity Futures Trading Commission was warned months in advance of problems that shut down the nation's potato markets in March, potato industry officials testified here today.
As early as last November and again in mid-January, The CFTC was told to expect trouble in potato trading on the New York Mercantile Exchange.
But neither the CFTC nor the NYME took action until Maine potatoes in early March began to be rejected by U.S. Department of Agriculture inspectors in New York.
When 90 percent of the Maine potatoes failed to meet U.S.D.A. No. 1 standards, the NYME ordered an unprecedented suspension of futures trading for delivery in March, April and May.
That action cost Maine potato growers millions of dollars, potato industry officials complained here at a CFTC hearing on the future of potato futures.
The March potato problem gave potato people, who have been trying for many years to outlaw futures trading, additional ammunition.
Chaired by CFTC member Robert L. Martin, the hearings are being held in the middle of potato country in the middle of the potato season. Aroostock County potato farmers are preparing to plant their 1979 crop now, and potato trucks trundle the streets of Presque Isle daily, shipping the last of the 1978 crop from potato houses where it has been stored since fall.
It is the quality of the potatoes coming from the storage - in barns banked high with soil against the cold New England wingers - that caused the halt in March potato trading.
Mercantile Exchange Chairman Michael Marks told the farmers trading was halted because there was not enough top quality potatoes to fulfil all the outstanding futures contracts.
But half a dozen potato growers, shippers and industry representatives said they believed there were adequate supplies of potatoes to allow trading to continue.
Witnesses also said the CFTC and the NYME should have begun worrying about potato quality problems last November when the first of the fall crop came to market.
Dorothy Kelley, executive vice president of the Maine Potato Council, said her organization on Jan. 17 told CFTC staff members to expect "a fiasco" in trading of potatoes for March delivery.
Professional potato trader Richard Weller said he "heard vibrations in February" that New York potato speculators were trying to exploit the shortage of top quality potatoes and jack up prices.
When the New York Mercantile Exchange finally did take action it went too far, complained Don Silver, and executive of MFX (formerly called Maine Farmers Exchange), a major potato dealer. Silver, Silver, himself a member of the exchange, said NYME officials had several alternatives for dealing with the situation that would not have halted potato trading entirely. Silver said he told Richard Levine, then president of NYME, "Don't do anything stupid," but the exchange halted trading anyway.
A Maine assistant attorney general, Sarah Redfield, said the New York Exchange "did not apparently seek to ask anyone in this state who is knowledgeable about the potato crop" whether there were enough potatoes to supply the market. "We believe that mercantile was wrong in concluding there were not sufficient quality potatoes."
Redfield complained that the CFTC and the Mercantile Exchange have refused to turn over to state investigators their internal reports and documents dealing with the March action.
Several Potato growers complained that the CFTC, as much as the NYME, is responsible for problems in the potato market. Said potato grower Jamers Carter, who admitted he lost $50,000 as a result of the halt in trading, "The Merc has been getting all the criticism that you people in Washington are responsible for."