TESTIMONY OF BROOKSLEY BORN, CHAIRPERSON
COMMODITY FUTURES TRADING COMMISSION
BEFORE THE SUBCOMMITTEE ON RISK MANAGEMENT AND SPECIALTY CROPS
HOUSE AGRICULTURE COMMITTEE
APRIL 10, 1997
Mr. Chairman and members of the Subcommittee, thank you for inviting me to present the views of the Commodity Futures Trading Commission on implementation of the risk management provisions of the Federal Agricultural Improvement and Reform Act of 1996. The major shift in farm policy embodied in the FAIR Act has created a new opportunity for America's farmers -- the freedom to farm for the market and not the government. But with that freedom comes new responsibilities as farmers shoulder the burden of managing for themselves market risks previously covered by government programs. In this new era for agriculture, it is vital for farmers to have the educational support that will allow them to create their own risk management programs.
The futures and option markets are an important element of the risk management tools available to agricultural producers. As the federal agency charged with regulatory oversight of those markets, the Commodity Futures Trading Commission strongly supports the FAIR Act's educational goals. In going forward with this educational mission, the CFTC brings to the table not only its experience, expertise and daily knowledge of the workings of the futures markets, but also a long history of commitment to agricultural risk management education. Since it was organized in 1985, the CFTC's Agricultural Advisory Committee (AAC) has given a spectrum of agricultural and agribusiness groups (currently 25 organizations) an ongoing voice in CFTC decisions affecting agriculture. The Commission has also sponsored various special programs targeting particular agricultural issues, including the September 1991 "Kalo A. Hineman Delivery Issues Symposium," named in honor of former Commissioner Kalo Hineman, who founded the AAC; the November 1994 "Summit on Risk Management in American Agriculture," co-sponsored by the Farm Foundation and organized by Commissioner Joseph B. Dial, the current Chairman of the AAC; and the December 1995 "Public Roundtable on Agricultural Trade Options."
The CFTC is committed to bringing its experience, history and commitment to bear in cooperating with USDA to carry out the consultative role that Section 192 of the FAIR Act envisions for the CFTC. In furtherance of this goal, as Chairperson of the CFTC, I have asked Commissioner Dial to serve as the CFTC's liaison with USDA in supporting the educational mandate of Section 192. I have also designated Ron Hobson, the Deputy Director for Market Research in our Division of Economic Analysis, who is with me here today, as the Commission's primary staff person on Section 192 matters.
The recent actions and current plans of USDA and the CFTC in support of the FAIR Act's educational mandate will be covered in detail in USDA's testimony, and I will not repeat that catalogue here. However, I have attached to my testimony a "Chronology of Recent CFTC/USDA Cooperation in Risk Management Education," which covers the CFTC's role in greater detail. I respectfully request that this chronology be included in the hearing record.
As demonstrated by the actions described in this statement and the attached chronology, the CFTC remains committed to fulfilling its obligations under the FAIR Act. We are continuing our active role in supporting the Act's risk management education initiatives in cooperation with the lead agencies in USDA and with private sector participants as well.
Consistent with the Subcommittee's wishes, this testimony has been limited to the risk management provisions of the FAIR Act. I would be remiss, however, if I did not at least mention in passing pending legislation that could have a significant impact on farmers' risk management activities. I am referring to H.R. 467, which will be the subject of hearings before this Subcommittee next week. In my testimony on that bill next week, I will detail the CFTC's concerns about the profound impact H.R. 467 could have by eliminating regulation of the futures exchanges at the very time that the risk management responsibilities embodied in the FAIR Act have made farmers and ranchers more dependent on futures markets than ever before.
Thank you again for the opportunity to appear before you. I will be happy to answer any questions the Subcommittee members may have.
Chronology of Recent CFTC/USDA Cooperation in Risk Management Education
April 4, 1996 -- the FAIR Act becomes law.
May 8, 1996 -- Twenty-first meeting of the CFTC's Agricultural Advisory Committee (the first of two meetings in 1996). Ken Ackerman, head of USDA's Risk Management Agency (RMA) and a member of the Advisory Committee, briefs the Committee on RMA's programs and responsibilities under the FAIR Act.
September 6, 1996 -- Commissioner Joseph B. Dial and CFTC staff members attend organizational meeting at USDA aimed at getting initial risk management education efforts underway.
October 7, 1996 -- Twenty-second meeting of the CFTC's Agricultural Advisory Committee. Committee members representing 17 agricultural and agribusiness organizations make formal presentations to the Committee concerning their organizations' plans and programs for risk management education.
November 20, 1996 -- CFTC representatives join with representatives of USDA, farm groups, academia and the crop insurance and futures industries in a "Forum on Risk Management Education," hosted by USDA, in Washington, D.C., with the stated purpose of "develop[ing] ways of providing producers useful information about risk management products and strategies." In addition to its own participation, the Commission also cooperated in securing the attendance of appropriate futures industry groups, including the National Futures Association, the Futures Industry Association, the Futures Industry Institute, the National Introducing Brokers Association and the futures exchanges.
December 16, 1996 -- Commissioner Dial delivers remarks entitled "Everybody Wins with Agricultural Risk Management Education" at Cooperative State Research, Education and Extension Service (CSREES) program on risk management education in Kansas City.
April 8, 1997 -- CFTC renews educational Memorandum of Understanding with USDA. The MOU, originally signed with the CSREES in 1992 and renewed in 1994, is revised and expanded to include both CSREES and the Risk Management Agency and specifically to incorporate the goals of Section 192 of the FAIR Act.
Ongoing -- CFTC is continuing its cooperation with USDA in longer term efforts to develop comprehensive education on management strategies. Options being considered include the establishment of Web site tutorials on the Internet, the use of radio and television "infomercials," and local meetings and seminars under the auspices of USDA's CSREES.