Thank you Chairman Heath P. Tarbert for your leadership in convening today’s meeting of the Agricultural Advisory Committee (AAC).  Given the ongoing, unprecedented volatility in the agricultural cash and futures markets, I am pleased that this Committee could come together today to share their insights regarding the liquidity, integrity, and accessibility of the futures markets with the Commission.  America’s agricultural producers and growers tirelessly dedicate themselves to putting food on our kitchen tables while they, themselves, constantly struggle to ensure the solvency of their farms and ranches.  The CFTC, along with the futures exchanges and market intermediaries, must work just as tirelessly to ensure that our futures markets remain a reliable, efficient hedging tool for them.  I am honored to join this important conversation and look forward to when we can convene again in person. 

This agency has a unique role to play in protecting America’s farmers and ranchers.  Since becoming a Commissioner, I have had the privilege of traveling all across America – to wheat fields in Kansas, soybean farms in Michigan, rice farms in Louisiana and Arkansas, a cotton gin in Georgia, corn fields in Iowa, Minnesota, South and North Dakota, and cattle ranches in Montana, to name a few.  I have been consistently impressed and humbled by these families’ work ethic, sophistication, and dedication to growing their businesses, many of which are family-owned, in the face of historically low commodity prices, international trade disputes, and intense competition.  Indeed, the combination of steep declines in commodity prices and global supply and demand forces has put unrelenting pressure on America’s farmers to increase yields, cut costs, and drive efficiencies to remain profitable.  The severe supply and demand shocks caused by COVID-19 are the latest of many challenges the heartland has withstood in recent years.  These difficult circumstances make it all the more vital that farmers and ranchers feel like they can depend upon liquid, well-functioning agricultural futures and swaps markets to hedge their risks. 

I am eager to hear from the Secretary of Agriculture, Sonny Perdue, about how the USDA is marshalling its considerable resources and expertise to combat the unprecedented challenges COVID-19 is posing to our agricultural markets.  Similarly, I am interested to learn the perspectives of Derek Sammann, the Global Head of Commodities & Options Products at the CME Group, and David Farrell, the Chief Operating Officer of ICE Futures U.S., regarding how the financial markets have performed during this period of market turbulence.  I also look forward to hearing insights from Rob Johansson, the USDA’s Chief Economist, Tom LaSala, the Managing Director & Global Chief Regulatory Officer of the CME Group, and David Amato, a Supervisory Market Analyst in the CFTC’s Division of Market Oversight.  The Commission is closely monitoring the evolving conditions in our futures markets.  I am committed – as I am sure all of my fellow Commissioners are – to ensuring that the futures markets retain their integrity and provide viable hedging opportunities to farmers and ranchers.

Market Integrity and Vigilant Oversight

Market integrity is essential to ensuring that Ag producers, processors, and merchants feel comfortable participating in our futures market.  One of the CFTC’s core duties is to promote futures markets that reflect supply and demand fundamentals and remain free from fraud and market manipulation.[1]  In order to have well-functioning, efficient markets, the terms of the futures contracts themselves must be sound.  This is why the CFTC requires all futures exchanges to monitor the terms and conditions of any futures contract that it offers.[2]  In particular, exchanges monitor to ensure that the terms of futures contracts keep pace with developments in the underlying cash markets and that futures and cash price convergence occurs.[3]  Without consistent convergence, market participants will not trust the contract to provide a reliable hedge, with the long term result that the futures markets will no longer provide a means of price discovery and risk mitigation. 

Recently, some have expressed concerns regarding the performance of certain futures contracts.  I take these concerns very seriously.  While it is not the CFTC’s role to design futures contracts – that job belongs to the futures exchanges – it is the CFTC’s responsibility to oversee the exchanges and ensure they are proactively and appropriately monitoring the performance of their contracts.  The Commission is committed to working with the exchanges and market participants to understand and resolve any issues.  I encourage market participants to continue voicing their concerns and experiences, to the exchanges, CFTC staff, and the Commissioners.  In particular, I commend the Chairman for convening the Livestock Market Task Force to examine conditions in the cattle markets and ensure contracts are working as intended. 

For over 150 years, the U.S. futures markets have enabled farmers and ranchers to hedge their commercial risk in the most liquid, competitive, and vibrant futures market in the world.  This is no small accomplishment.  It has taken generations of hard-working, creative, and aspirational thinkers to build today’s futures industry.  I am committed to working with the agricultural community and the exchanges to strengthen the trust that Ag producers have in our futures markets and ensure this longstanding tradition continues for America’s next generation of farmers. 

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