Good morning.  I am so very pleased to welcome so many joining in the building today and virtually for this Agricultural Advisory Committee (AAC) meeting.  I thank Chair Behnam and Brigitte Weyls, Designated Federal Officer for the AAC, for their efforts to organize today’s meeting.  I look forward to hearing and learning more today about the topics outlined on the meeting agenda.

The issues raised today are of the utmost significance because they reflect the challenges faced by an industry that has supported our economy since our nation’s founding.  The difficulties that these many small- and medium-sized businesses may face impact not only the individual firms and families that work hard daily to feed our nation, but many businesses and individuals throughout our nation and around the world.  Higher prices will mean that families in fragile financial circumstances face hard choices as they evaluate whether to add butter, bread, or burgers to their grocery baskets.

As a native Michigander and a longtime resident of Texas and Georgia, I am proud of the many families and businesses that stand behind the agricultural production industry and I want to ensure that pricing and hedging in commodity and derivatives markets work effectively to ensure their long-term sustainability.  I spent several weeks this summer in states at the heart of the nation and central to many of the issues raised today.  I asked farmers, ranchers, traders, commodity exchange executives, scientists, environmental experts, and others to help me to better understand and prepare for my efforts to serve our nation as a CFTC Commissioner.  I anticipate that we will continue this learning tour with today’s discussion.

1. The CFTC’s Role in Price Discovery and Market Oversight Is Critical To Ensuring the Stability and Integrity of Agricultural Markets

The safety and soundness of the agriculture markets is a priority for this Commission, and this commitment is especially critical during times characterized by persistent volatility, inflation, and geopolitical conflicts that deeply impact the prices paid for the raw materials and basic resources that fuel production in agricultural markets as well as the pricing of deliverables.

The Commission plays a key role in reducing market volatility and mitigating risk by: (1) ensuring that our derivatives markets are fair and transparent; (2) promoting responsible innovation; and (3) protecting end-users through enforcement.

Over the last several years, the impact of the continuing COVID pandemic, geopolitical events in Europe, inflation, and a number of other macroeconomic conditions have led to increasing unpredictability in the prices for agricultural commodities and food insecurity in a number of regions around the world.[1]  On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic.  In the period immediately prior to and following WHO’s declaration, markets witnessed unprecedented volatility in the prices of critical inputs.  For the nearly three years following the onset of COVID-19, speculation, uncertainty, and volatility have continued to characterize pricing. COVID lockdowns in China further influence markets.

The sustained periods of volatility have created enormous pressure for many markets and unique challenges for agricultural markets, disrupting supply chains, prompting surges in demand for certain agricultural resources, and reducing fundamental supplies.  Coupled with the events of the pandemic, geopolitical events including Russia’s invasion of Ukraine have triggered further disruptions.

For months, we have witnessed precarious uncertainty surrounding the production, distribution and pricing of wheat, corn, soybeans and other crops.  Reduced access to energy has exacerbated production and distribution challenges and led to skyrocketing prices for fertilizer.  Among other concerns, drought has impacted Mississippi river water levels and influenced production and pricing for various crops.

While the onset and continuation of many of these macroeconomic events are beyond the remit of the Commission, it is essential that the Commission deploys its antifraud and market manipulation authority to the fullest extent.  We must interrogate the data to ensure the integrity of markets.  If excessive price volatility is not the product of fundamentals, we must be prepared to introduce enforcement actions to stop misconduct where it is happening.  In light of the confluence of factors affecting market pricing, we may need to heighten surveillance of pricing and volatility to isolate the fundamental and other drivers.

The Commission plays a critical role in derivatives markets by overseeing exchanges that allow for price discovery and risk mitigation in the futures, options, and swaps markets.  The CFTC’s mission is to protect market participants, maintain orderly markets, and foster responsible innovation in derivatives markets.  To achieve these goals, the CFTC has a number of responsibilities, which include developing rules and regulations for market activity; monitoring trading activity; conducting investigations into potential violations of the CEA; educating the public; and providing guidance to market participants.  The CFTC also collaborates with financial regulators within the United States and around the world to ensure that international trading of commodities adheres to appropriate regulations.  Finally, the Commission engages with industry stakeholders through its advisory committees to gather valuable information and knowledge to inform policy. By fulfilling its role, the CFTC helps facilitate fair and transparent pricing of commodities while providing stability and security in the marketplace.

As sponsor of the Commission’s Market Risk Advisory Committee (MRAC), I am keenly aware of the risks and challenges facing agricultural markets.  As I stated during MRAC’s inaugural meeting in September, “[A]griculture is essential to the fundamental needs of everyone around the world, and we are reminded of that now more than ever.”[2]

Today the agricultural markets face new challenges but remain resilient due to the market structures and principles established over 100 years ago.  When the question arises—how we are going to feed the world's nine billion people—all eyes turn to the agricultural community.

2. The CFTC Must Work with Stakeholders To Build a Sustainable Future

The Commission must work with all stakeholders to promote responsible innovation in the agricultural markets.  The American Farm Bureau Federation (AFBF) reports reductions in greenhouse emissions in the livestock sector where farm efficiencies increase.[3]  AFBF also notes that American farmers and ranchers are leading the way in sustainable practices that reduce emissions, enrich the soil and protect our water and air, all while producing more food, fiber, and renewable fuel than ever before.[4]  To build a sustainable future, we must continue to maintain an open dialogue with all stakeholders to find innovative solutions to the macroeconomic challenges facing the agricultural industry and to ensure that Commission’s policy decisions are well informed.

In May of 2021, President Biden issued an Executive Order on Climate-Related Financial Risk directing the Secretary of the Treasury to engage with Financial Stability Oversight Council (FSOC) members to consider issuing a report on member agencies’ efforts to consider climate-related financial risk.[5]  In response, the CFTC issued a request for information (RFI) to better understand the impact of climate change on commodities markets and the critical role that derivative markets can play in allowing market participants to manage their risk in the changing economic landscape.[6]  As I have previously noted, the RFI is an important step toward learning from our market participants how these markets may help them to hedge and efficiently manage existing and evolving climate-related risk.[7]

In addition to the climate-related risk RFI, the Commission held a convening regarding the voluntary carbon markets on June 2, 2022.[8]  While the Department of Agriculture and other agencies also play crucial roles in addressing climate change, the climate crisis requires a whole-of-government approach, as recognized by the Biden administration, and the CFTC will benefit from engagement with this committee in ensuring it is doing its part.

The Commission is also deeply thoughtful about the potential benefits and perils of adopting emerging technologies such as distributed digital ledger or blockchain technology.  We want to advance sustainable, cost-effective, and efficient approaches to track livestock and crops and finance farm production.  Yet, we are mindful that bad actors who may not have the community’s best interest in mind may engage in misconduct and attempt to mislead, take advantage, or worse.

In conclusion, I believe a key to building a sustainable and vibrant agricultural market the Commission must continue to engage with stakeholders; ensure that our derivatives markets are fair and transparent; promote responsible innovation; and aggressively pursue bad actors.  I again thank the Chairman for his leadership and my fellow Commissioners and Agricultural Advisory Committee members for participating in today’s meeting.  I look forward to hearing from members and learning more about the important issues impacting our agricultural markets.

[1] See U.S. Dep’t of Agric., International Trade Report (Apr. 6, 2022), https://www.fas.usda.gov/data/ukraine-conflict-and-other-factors-contributing-high-commodity-prices-and-food-insecurity.

[2] See Opening Statement of Commissioner Kristin N. Johnson Before the Market Risk Advisory Committee Meeting, Sept. 28, 2022, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement092822.

[3] Am. Farm Bureau Fed’n, Sustainability in Agriculture, https://www.fb.org/land/sustainability-in-ag.

[4] See id.

[5] See Exec. Order No. 14,030, 86 Fed. Reg. 27,967 (May 20, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/05/20/executive-order-on-climate-related-financial-risk/.

[6] CFTC Release No. 8541-22, CFTC Releases Request for Information on Climate-Related Financial Risk, June 2, 2022, https://www.cftc.gov/PressRoom/PressReleases/8541-22.

[7] See Statement of Commissioner Kristin N. Johnson in Support of the CFTC’s Request for Information on Climate-Related Financial Risk, June 2, 2022,
https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement060222.

[8] See CFTC Release No. 8539-22, CFTC Announces Agenda for the June 2nd Voluntary Carbon Markets Convening, June 1, 2022, https://www.cftc.gov/PressRoom/PressReleases/8539-22.