Good morning and thank you to the U.S. Cattlemen’s Association (USCA) for inviting me to provide some remarks.  As you all have experienced firsthand, livestock markets have been hit hard by extreme and unpredictable weather these last several years, with record droughts forcing many (if not all) of you to make the difficult choice between bringing in expensive feed to supplement pasture loss or thinning the herd.  This has resulted in cuts to the national cattle herd size to a 61-year low.[1]  The cattle cycle means that these impacts will be felt for years to come.

I want to thank all the USCA members and the producers from across the U.S. for your tireless efforts advocating for transparency and robust price discovery in CFTC markets, supporting the health and safety of our domestic herds, and protecting the cattle producing industry throughout the value and supply chain.

You are leaders.  Your commitment to the economic stability and sustainability of U.S. cattle production not only impacts the prices American consumers pay for beef, but determines the livelihood of families around the country whose businesses, operations, and occupations directly serve and support the industry.

I especially want to recognize that among your key initiatives is focusing on the future of our nation’s cattle industry.  Continued concentration in parts of the value chain creates significant challenges for producers like yourselves.  It is incumbent on all of us to ensure that markets remain fair, transparent, and have healthy competition, which will ensure competitive prices for ranchers and consumers.  I have worked closely with our partners at USDA over the past few years on this issue, and as a member of President Biden’s Competition Council, will continue to engage with colleagues in Washington for competitive livestock markets. Ultimately, competitive, transparent markets mean healthier and stronger derivatives markets, which are key to effective risk management and fair pricing.

We share a common goal to ensure that strategies employed today will support and sustain the cattle markets in the decades to come.  These strategies include making certain that our derivatives markets remain resilient, accessible, and cost effective as a risk management and price discovery tool for cattle producers.  They also include safeguarding the cash and futures markets against mischief and misconduct through robust surveillance and swift enforcement.  And, we must ensure that as we increasingly incorporate new technologies into our operations, we do so responsibly—especially here, where the impacts can go beyond the purse strings into the safety and viability of our food supply.  With all of this, there is education and outreach, partnership and engagement, and cooperation and collaboration—things we universally agree are always a value add.

The U.S. derivatives markets are not only vital to agricultural stakeholders for price discovery and hedging, but the information and data generated and disseminated by and through our markets underpin many more USDA-sponsored risk management programs such as insurance and commodity-based programs.

Though the CFTC’s role is limited to enforcement authority in the cash markets, CFTC economists and analysts monitor the commodity markets, including cattle, on a daily real-time basis, and can view the derivatives positions of large traders on a next-day basis.  CFTC regulations require and CFTC has access to extensive data beyond large trader positions including transaction, messaging, and swaps data.  Recently, I created and filled the position of Chief Data Scientist with the goal of further enhancing our analytic capabilities and leading the upskilling of our staff as we increasingly innovate our data culture across the Commission.  This will ultimately serve to ensure our markets remain fair, transparent, and resilient for years to come.

Evidence of CFTC’s rigorous surveillance and monitoring work can be seen in the number of enforcement actions related to cattle markets over the past few years, from misreporting to manipulative activities.[2]

Bringing bad actors to justice not only maintains the integrity of our markets, but our orders provide transparency by helping to identify potential structural market weaknesses and clearly articulating when conduct may cross the line.  Another way the CFTC promotes transparency is by publishing weekly Commitments of Traders Reports, and we launched a new, user-friendly platform in 2022.[3]

In addition to analyzing our data, CFTC staff monitor supply and demand fundamentals, especially at times of market stress, such as during the COVID pandemic and into the recent period I have often likened to a perfect storm of externalities impacting our commodity markets.[4]  It is important to note the crucial role futures markets played during this extraordinary era. With livestock and grain markets under historically intense stresses, especially with the livestock cash markets virtually seizing up at points during the pandemic, futures market transactions were often the only reliable, transparent venue for price discovery and hedging for some of our agricultural markets.

This tremendous uncertainty from the supply chain breakdowns during the multi-year storm was reflected in futures bid/ask spreads widening significantly, historic increases to futures price volatility, and futures price limits being triggered at the highest rate in history in agricultural markets like lumber and livestock.  However, through it all, in general, the futures market reflected supply and demand fundamentals with solid convergence at expirations.  The Russian invasion of Ukraine, economic downturns, and extreme weather still hang over the market. However, there is a rainbow on the horizon and futures bid/ask spreads and volatility have returned to more normal levels, as the pandemic has waned and the supply chains, while still vulnerable to disruption, have improved, especially when compared to 2020.

Currently we are keenly following developments and deployment of artificial intelligence (AI) in agriculture, including livestock management.  AI smart farming tools have the potential to revolutionize livestock management.  Recent advances in machine learning algorithms and sensor technology have enabled the automation of this process and the collection of valuable data on livestock health and behavior. Sensors placed on animals help collect data on their movements, behavior, and psychological signals like temperature and heart rate.  This data is then analyzed using machine learning algorithms to detect patterns and anomalies that can indicate health issues or changes in behavior.

At the December 14th meeting of the Commission’s Agriculture Advisory Committee (AAC), which I sponsor, we will be building on earlier discussions focused on education and access to futures markets, and discuss geopolitical and sustainable issues impacting the future of agriculture.[5]  Though we are finalizing the agenda, we anticipate that one or more speakers from the many centers and institutes at Cornell University that provide resources and expertise on agriculture will lead a panel on a range of topics we anticipate may include the use and future of AI, especially as it relates to food security and data.  Other topics of discussion will include margin and its impact on market participants and an update from USDA on global events and their impact on U.S. futures markets, market logistics, and prices.  These remarks will include a segment on the cattle markets.  Please be on the lookout for a press release announcing the formal agenda shortly.

Also coming soon will be a press release announcing AgCon 2024 set for April 11-12 in Overland Park, Kansas.  The CFTC and the Center for Risk Management Education and Research at Kansas State University will jointly host this 3rd AgCon--and the first since 2019.  The conference brings together federal and state government officials with agribusiness and academia to discuss topics of high priority to America’s farmers and ranchers.

I am thrilled to be able to announce these events here for the first time.  While our markets are constantly transforming and moving forward, it is important the CFTC stays true to the farmers, ranchers, and others along the traditional agricultural value and supply chains that serve as our historical core constituency.

In March, I testified before the Senate Committee on Agriculture, Nutrition, and Forestry regarding CFTC oversight.[6]  The process for the 2023 Farm Bill was underway, and your concerns and expectations were front and center.  With agricultural market developments at the heart of policy debates on a global scale due to increasing food prices, transportation challenges, ongoing market volatility, market concentration, and the real risk of food insecurity, I reaffirmed the commitment I made during my 2017 nomination hearing to ensure the U.S. derivatives market remains both a desirable and cost-effective risk management and price discovery tool for agricultural producers and the entire value chain.

The lack of certainty in your businesses is in part why the derivatives markets exist. The CFTC faces its own uncertainty related to its annual budget.  Thank you to all of your members for supporting our budget request for this fiscal year.  As you all know, an uncertain budget ripples through any organization, and as we deal with our own, we must make difficult choices when it comes to how we address the emerging challenges to our markets while keeping pace with innovation.

In closing, I want to thank you again for inviting me to be a part of this meeting.  I look forward to you joining our AAC meetings, AgCon, and reaching out in general. Staff in the Division of Market Oversight are always available for industry to share general concerns or provide us market color, and our Whistleblower Office is open 24/7 if you have complaints.  Our Office of Technology Innovation is providing education across the globe and our Office of Customer Education and Outreach is under new leadership and will be making rounds at conferences and events around the country.  In short, let’s stay engaged.  Thank you.