Remarks for Chairman J. Christopher Giancarlo at the 2018 Agricultural Commodity Futures Conference, Overland, Kansas

April 5, 2018

Thank you and good morning.  Welcome to the First Agriculture Commodity Futures Conference.  Good to have you with us.

The Commodity Futures Trading Commission is pleased to co-sponsor this event with the Center for Risk Management and Education at Kansas State University.  KSU has been a sound, reliable, and credible partner.  I would especially like to thank Dr. John Floros, Dean of the College of Agriculture.  He has been a steady and helpful presence throughout the sponsorship and planning stages of the conference.

His voice, and yours, are heard across the nation and around the world.

Like many of you, I was impressed by the recent movie about Winston Churchill, “Darkest Hour.”  As you know, in 1946, Churchill made his famous “Iron Curtain” speech in nearby Fulton, Missouri, just a couple of hours from here on I-70.  His speech was titled “The Sinews of Peace.”[1]

Much was made at the time about its location.  Many said it was a favor to President Truman.  But, others argued this was the ideal location.  Churchill traveled from Great Britain, and then together with President Truman from Washington, to speak in the American Heartland.

Why?  Churchill answered that question at the start of the speech.  Here in the heartland was the “opportunity” to speak to the world.  And, here, the world would listen.  The setting demanded attention.

So we know why Winston Churchill came here.  Why are we here?  Well, for the very same opportunity to speak from America’s heartland to the wider world.

The American agricultural market is significant.  Agricultural, food, and related industries contributed $992 billion to the U.S. economy in 2015, 5.5 percent of the gross domestic product.[2]  And, in 2016, agriculture provided 21.4 million full-and-part time jobs, 11 percent of total U.S. employment.[3]  In that same year, 2016, food accounted for 12.6 percent of American household expenditures.[4]  The agricultural swaps market was estimated in 2014 to be about $51 billion in notional amount.[5]

The figures in international trade are also sizable.  In Fiscal Year 2018, the Department of Agriculture projects that agriculture exports will exceed $140 billion, with imports at $119 billion, for a net balance of trade over $20 billion.[6]  That balance of trade is good for the nation and for American famers.  This country is the breadbasket to the nation and the world.

Our futures and swaps markets serve at least two critical roles in helping to feed the world’s growing population.  First, they allow markets to resolve imbalances dispassionately and efficiently by providing reliable and fair benchmarks for prices.  Second, they reduce price volatility in a resource-constrained world by removing the economic incentive to hoard physical supplies.  They allow Ag producers to quantify and transfer the risks of production to persons willing and able to hold that risk, stabilizing earnings and benefiting all parties, including consumers who may never get involved in derivatives markets.  These markets provide confidence to global consumers of American agriculture that the prices paid are fairly set free of market manipulation or interference.

This first-of-its-kind conference is called, “Protecting America’s Agricultural Markets:  An Agricultural Commodity Futures Conference.”  Our purpose is to examine key issues in our commodity futures markets that are part of the “sinews” of the American economy.

We will discuss current macro-economic trends and issues affecting our markets, like market speculation, high frequency trading, trade data transparency, novel hedging practices and market manipulation.  We will look at problems in convergence between cash and futures prices and volatile storage rates.  We will hear about advances in distributed ledger technology, algorithmic trading and other emerging digital technologies.  And we will hear about current regulatory activities in protecting participants from manipulation, fraud and other unlawful activities.

We will also discuss consumer awareness and customer education.  Market growth and surveillance are assisted, even stimulated, through consumer education.  The CFTC’s Office of Consumer Education and Outreach engages with a range of audiences such as retail investors, industry professionals, seniors, and vulnerable populations who may be targeted by unscrupulous individuals with the intent to defraud them of their savings.  We plan to expand this engagement in the year to come.

We have outstanding speakers and panels.  We will all benefit from the presentations.  Our common purpose is to consider and address issues of emerging market structure and trading practice to ensure that these markets remain the world’s most robust, dynamic and liquid for decades to come.  American commodity futures markets are vital national interests that we must protect and enhance.

I want to thank both Senators from Kansas for coming to this conference.  Senator Roberts is a graduate of Kansas State.  This is a homecoming for him.  And, Senator Moran went to college at Ft. Hays State, down the other way on I-70, with its outstanding Department of Agriculture and the valuable degree in Agricultural Business.  They have both been very helpful in setting up this conference, very supportive and encouraging.  Both will be speaking here.

I started by mentioning Churchill.  In 1946, the same year Churchill came to Fulton, he also purchased a farm contiguous to his home.  He wanted to experience the life of agriculture, feel the soil on his hands, grow crops, and study the weather.  He knew agriculture was important to the British economy.  He wanted to be part of the farming community.  Above all, he wanted to listen to other famers, to learn from them, to understand their fears and doubts, their joys and triumphs.

We have come here primarily to listen.  We want to hear your voice, and, in turn, be your voice in Washington.  We are now living through a technological revolution, which effects agriculture just as it does every sector of the American economy.  These changes can be confusing, even frightening.  Let’s not live in fear.

Through our discussions we will help each other.  And, help the consumer and the economy.

It is now my pleasure to introduce Dr. John Floros, Dean of the College of Agriculture at Kansas State University.

Statement of Commissioner Brian D. Quintenz before the CFTC Agricultural Advisory Committee

April 5, 2018

Thank you Commissioner Behnam for your leadership in convening today’s meeting of the Agricultural Advisory Committee (AAC)—the first such meeting since 2015, much too long of a time to have gone by without the input of these experts.  While the practice of prior leadership of this Committee was to hold one meeting a year, I am hopeful that either with your leadership, Commissioner Behnam, or new leadership once additional Commissioners are confirmed, we can take more frequent advantage of this important panel’s significant expertise.

I am delighted to join you and Chairman Giancarlo, and all of the distinguished members of this Committee, for its inaugural meeting in the heartland of America’s farmers and ranchers.  For decades this Committee has provided the Commodity Futures Trading Commission (CFTC) with invaluable insights into the pressing issues of the day: agricultural trade options in the 1990s, the transition from pit to electronic trading in the 2000s, and perennial challenges involving deliverable supply and convergence.  I look forward to a robust discussion today about the state of our futures markets and their ability to serve as an effective price discovery and risk management tool for the Ag community.

It is fitting the AAC is meeting in Overland Park, a town founded by a gentleman named William B. Strang in 1905.[1]  Mr. Strang left home at the age of 15 and ultimately became an American railroad magnate, building railroads all over the country, including the Missouri and Kansas Interurban Railroad (running through Overland Park) that was built along the historic Santa Fe Trail.[2]  An avid believer in innovation, Mr. Strang built the first self-propelled railroad motor car in the world.[3]  Fascinated by progress, he also constructed an airfield in Overland Park in 1909—only six years after the Wright Brothers’ first flight—so that locals could witness the novelty of the new, so-called “flying machines.”

I highlight Mr. Strang’s accomplishments because I believe they are a reminder of what is possible if we follow our aspirations and of how the vision of one person can have generational economic impacts.  The railroads that Mr. Strang built, in conjunction with America’s natural inland waterways, enabled cities like Chicago and Kansas City to become hubs of commerce and markets for America’s grain, produce and cattle.

Today, of course, there are different challenges that must be overcome by modern vision, leadership and ingenuity.  As I will discuss in more detail tomorrow, the challenges facing the agricultural industry today—historically low commodity prices, intense international competition, ever slimmer profit margins—make it more important now than ever that the futures markets remain a trusted, effective tool for price discovery and risk management for America’s farmers and ranchers.

Indeed, the need for futures prices to reflect supply and demand fundamentals impacts even those who choose not to directly participate in the futures markets.  Crop insurance, an essential risk management tool for many farmers, relies upon futures prices to determine the expected income of farmers in the event a payout is made.  Today, over 300 million acres of farmland is covered by crop insurance, with an insured value of over $100 billion.  I am interested to learn more about how the crop insurance program is working today from our first panel and make sure we all understand that a lack of convergence impacts not only risk management hedging, but also the effectiveness of the crop insurance safety net.

In addition, given the past several years of depressed commodity prices, farmers’ use of credit is rising.  According to the USDA’s Economic Research Service, in 2017 the farm sector’s debt-to-income ratio, which measures a farmer’s ability to pay down liabilities, rose above 6 to 1.[4]  The last time we saw such a high debt-to-income ratio for farmers was the 1980s.[5]  I look forward to hearing from the Farm Credit Administration (FCA) today about the various ways the FCA and the private sector can continue to meet the financing needs of farmers and ranchers.

From our final panel, we will hear from CME about the recent implementation of block trading in certain agricultural products.  I am interested to hear the panel’s observations about how the expanded use of block trades in this space is impacting liquidity and price discovery.

Together, the futures markets and crop insurance are the cornerstones of the farm safety net.  They work together to ensure that farmers do not lose access to credit in a very volatile industry—so that farmers can continue to provide Americans, and the world, with high quality, low cost food.  I commend Commissioner Behnam for hosting this meeting today to explore how these issues are impacting the vitality of the Ag community, and thank Charlie Thornton, the Designated Federal Officer of the Committee, for all of his hard work in planning today’s meeting.

Statement of Commissioner Rostin Behnam before the Agricultural Advisory Committee Meeting

April 5, 2018

Good morning and welcome to the first CFTC Agricultural Advisory Committee (AAC) meeting of 2018.  I am pleased to sponsor this Committee, and thrilled to be able to host this meeting in Kansas.  In addition to being home to a CFTC Regional Office, Kansas is home to America’s heartland, where many of our nation’s farmers and ranchers proudly produce the food and fiber that feeds our world’s growing population.

Before we move into the substance of today’s meeting, I want to thank Commissioner Quintenz and Chairman Giancarlo for being here this morning and for their contributions to the discussion. 
 
I want to thank each of the panelists.  We have gathered a distinguished group of speakers, and their willingness to participate is greatly appreciated and critical to today’s discussion.
 
I would also like to thank Christa Lachenmayr.  As a member of the CFTC’s Division of Market Oversight, Christa’s hard work, dedication, and knowledge of agricultural markets have proven, for many years, to be an invaluable resource for the CFTC, market participants, and stakeholders.  Christa played an integral role in setting today’s advisory agenda, and her skills will certainly be on display throughout the morning.

Finally, I want to thank Charlie Thornton, CFTC’s Director of Legislative Affairs and this Committee's Designated Federal Officer (DFO).  Charlie and I worked together as staff on the Senate Agriculture Committee for several years.  In selecting Charlie as the Committee’s DFO, I considered his knowledge of agricultural policy and our strong working relationship.  As sponsor of the AAC, it’s important that I engage thoughtfully with the Committee’s members and outside stakeholders.  My goal is to lead discussions that will drive better policy and ultimately strong, transparent, and safe derivatives markets.  Charlie certainly will play a leading role in helping me—and all of us—to reach that goal.

In November, 2017, shortly after being sworn in as Commissioner, I announced a listening tour for the first year of my term.  Since then, I have been fortunate to visit many businesses across the country, including several here in Kansas City.  Throughout my visits, I’ve been able to hear directly from members of industry, market participants, end-users, and the public. And, I’ve shared some of my own views.  The meetings and conversations have allowed me to inform and formulate goals and ideals for my term that are grounded in real-world concerns and challenges.  Today’s panels reflect some of the more pressing concerns brought to my attention.

Today we will dive into two timely topic areas: crop insurance and agricultural block trading.  First, crop insurance is a critical risk management tool for growers; its importance cannot be understated.  Having worked on the 2014 Farm Bill, I intimately understand the important role crop insurance plays in a producer’s risk management tool box.  However, the fundamental role futures markets play to crop insurance is often overlooked.  I am hopeful this morning’s discussion will educate and inform the Commission regarding the intersection of the two, and further the CFTC’s active engagement with registrants, market participants, the USDA, and agricultural stakeholders to ensure confidence in the crop insurance program.

Later this morning, we will discuss price discovery and the recent implementation of block trading in agricultural futures contracts.   I am looking forward to hearing from both the panelists and the Committee membership on this important issue.  Price discovery and liquidity are integral to well-functioning futures markets, and the CFTC must ensure that market structure does not adversely affect either.

Finally, we are very fortunate to have staff from the Farm Credit Administration (FCA) in attendance to share their insights on the state of farm credit, and the role risk management plays in a producer’s ability to borrow capital.  Farmers and ranchers place everything on the line at the beginning of the season, often needing to borrow significant capital to purchase machinery, seed, fertilizer, crop protection materials, and feed.  That said, a well-hedged producer is a stronger borrower, and hopefully this will be the first of many discussions between the CFTC, FCA, and stakeholders to better educate borrowers and creditors about the futures market and the role it plays in risk management.

The agricultural economy has faced stiff headwinds for many years.  Persistently low commodity prices, extreme weather events resulting from climate change, and trade policy are a few of the significant hurdles that make production agriculture more challenging every year.  The CFTC has historically played a key role in helping producers discover prices and manage risk.  As the Congress considers the 2018 Farm Bill, I am committed to ensuring that the CFTC plays a leading role in ensuring that derivatives markets remain a desirable, cost-effective, and transparent risk management tool for all agricultural producers, including our new and beginning farmers. A healthy farm economy is a big part of a strong and vibrant rural economy, which is integral to our nation’s prosperity.

This morning’s AAC meeting, and the first of its kind Ag Conference hosted by Kansas State University are steps to fulfill that commitment, and I look forward to the many important discussions today and tomorrow.

Remarks of Chairman J. Christopher Giancarlo at the Women’s History Month Event, Washington, D.C.

March 20, 2018

Every year, in March, America celebrates Women’s History Month.  Thirty-one years ago, in 1987, Congress declared March as National Women’s History Month to mark the inspiration, accomplishments, and contributions of women in our public life, culture, and businesses.

Today, we have a guest speaker who is a Washington legend, an expert in her field, and a trail blazer:  Rebecca Dye of the Federal Maritime Commission.  Commissioner Dye has served four terms there as commissioner.  Rebecca is known for her passionate and encyclopedic knowledge about maritime issues, her strong leadership, depth of knowledge, active mentorship, and remarkable drive throughout her career. As Rebecca has explained, the seas and waterways are our national and global highways, the source for the transportation of the vast majority of goods.  And, when she speaks, people listen.  Rebecca is internationally recognized as a scholar, advocate, and regulator, a brilliant mind in history, law, and global commerce.

And, she knows how to get things done in Washington.  For example, in 2002, when she was first nominated to be a commissioner, she explained to a congressional committee why sound maritime policy was essential for American commerce.  That ocean transportation accounts for 95 percent of cargo tonnage that moves in and out of the country.  The senators listened intently.  At that moment, she had come full circle, having been earlier on the other side of the table, as counsel to the House Transportation and Infrastructure Committee. 

That career started in the Coast Guard, with a commission as a lieutenant in 1979.  She then served as a White House Military Social Aid during the Carter and Reagan administrations.  Numerous accomplishments followed, including professor on the law faculty of the U.S. Coast Guard Academy and in several positions in health care, business, and government.  But a key theme has been a life of service and giving.

Commissioner Dye continues to share her views with the nation, especially on topics like commercial shipping and international agreements, maritime safety, and security issues.  Now, today, she has come to CFTC, to talk to us, the regulators of the commodities inside the containers on those ships.  This is a unique moment, made possible by Women’s History Month. 

We are pleased to have her with us. Ladies and gentlemen, Commissioner Rebecca Dye.

Commissioner Behnam Statement on the CFTC Budget Cut

March 22, 2018

Commodity Futures Trading Commission (CFTC) Commissioner Rostin Behnam issued the following statement on the congressional budget proposal that reflects a decrease in the CFTC's funding level:

"The recently released congressional budget proposal unimaginably cuts the Commodity Futures Trading Commission’s (CFTC’s) funding level, leaving our nation’s critically important derivatives market and the general public increasingly vulnerable to systemic (and other) risk, and susceptible to fraud and manipulation.  Derivatives markets played a significant role in the 2008 financial crisis, and the Congress responded with Wall Street reform that requires the CFTC to oversee the approximately $600 trillion dollar previously unregulated over-the-counter swaps markets.  While the CFTC has continuously met and exceeded the challenges of bringing these markets under our jurisdiction, its efforts have never been matched with requisite resources.

"Growing cyber threats, domestically and internationally, examinations of our clearinghouses at home and abroad, and the rapid growth of the fintech industry present new, challenging issues that the CFTC will not have the resources to address in a timely and adequate manner.  Simply put, the CFTC cannot responsibly innovate and meet the needs of rapidly evolving markets and market participants absent additional funding.

"I will continue to support Chairman Giancarlo’s budget request – and more – as this agency and its dedicated staff continue to do the best job they can to keep these global markets safe, transparent, and free from fraud and manipulation."