As I have had the fortune of being able to meet with farmers and agricultural producers, I have heard multiple times how important it is for the CFTC to police the markets against manipulation or anything else that could drive up prices.  If the farmers and food producers are hurt by market abuse, American families are also going to feel it at the grocery store when they try to feed their families.  That is why the CFTC’s mission to promote integrity in these markets is so important.

Using Market Surveillance and Enforcement to Promote Market Integrity

The CFTC uses its data and expertise to conduct market surveillance of commodities and derivatives markets.  In September 2022, I called on the Commission to conduct deep dive studies on specific trading in commodity derivatives that were experiencing significant volatility and price increases (at that time wheat, oil, and natural gas) because of the potential impact on American farmers and families.[1]  This important work would help ensure that prices reflect supply and demand, and not artificial increases due to market manipulation, excess speculation, or anything else.  I also recommended publicly releasing findings from that analysis to promote confidence in our markets.     

Our enforcement program is critical to policing unfair, deceptive, and abusive practices, including any attempt to manipulate markets and artificially increase prices.  Under the Commodity Exchange Act, it is illegal to manipulate or attempt to manipulate the market.  That includes intending to cause an artificial price. 

Additionally, pursuant to the White House’s Executive Order on Promoting Competition in the American Economy, the CFTC has a role to play in policing unfair, deceptive, and abusive business practices in order to protect conditions of fair competition.  The Executive Order discusses concentrated market power in the agricultural industry that squeezes farmers.  Greater competition would allow family farmers and other small businesses to keep a greater share of the value they produce. 

Enforcement of Laws to Prevent Attempts to Artificially Increase Prices Through Market Manipulation

I support the $3 million enforcement case against defendant Ceres Global Ag for attempting to manipulate the oats markets. The oats futures market is a small market.[2]  Smaller markets are easier to attempt to manipulate than larger markets, particularly by large players.  The defendant is one of the largest merchandisers of oats in the United States.  Ceres calls itself a “big fish in smaller ponds,” referring to its high market share in three core products.[3]  According to Ceres, as of 2022, it is in the “Top 3 by volume serving U.S. & select international customers with Oats, Durum and Spring Wheat.”[4] 

Twice, the defendant attempted to artificially inflate oat futures prices through market manipulation.  The first time was in June 2016.  The defendant had reported a CA$15.8 million net loss for the fiscal year ending June 30, 2016.[5]  The defendant again attempted to artificially inflate oat futures prices through market manipulation in early 2017, months before the end of its fiscal year.  In the 2017 Annual Report to Shareholders, the Chairman’s Message said, “Fiscal 2017 was a challenging year for Ceres Global Ag. Corp.  For most of the year, the supply of grain worldwide was much greater than demand. The effects were felt throughout the entire supply chain creating volatility in markets, low margins and aggressive competition.”[6]

The defendant’s goal was both to profit from futures trading and harm its competitors.  Defendant’s internal communications discussed using “our initial size as a catalyst to help boost that spread/flat price higher.”  The defendant sought to reduce the amount of oats available to other market participants who held short positions, including its competitors, who might not have sufficient oats to meet their delivery obligations, leaving them “scrambling.”  

I applaud our Enforcement staff for their hard work in protecting the integrity of commodity futures markets by seeking to bring accountability to a defendant who attempted to manipulate the market.