The following letter was sent to Robert Sidman, deputy secretary of the Commodity Futures Trading Commission on December 14, 2022. Watch the recording of the Agricultural Advisory Committee meeting on December 7 on YouTube here.
Dear Mr. Sidman,
The Institute for Agriculture and Trade Policy (IATP)1 appreciated the opportunity to view the AAC meeting on December 7 and is grateful for the opportunity to submit these comments about the meeting and future possible topics for the AAC’s consideration. IATP last wrote to the Commission in response to its Request for Information (RFI) regarding climate-related financial risk.2 A few of our responses to Commission questions concerned agricultural derivatives contracts. Save in one instance, we will not cite or paraphrase from that letter, but refer you to our answers to questions 1, 4 and 12. (IATP summarized responses from some of the 77 commenters to the RFI, some of whom threatened to sue the agency or discouraged the Commission from taking any regulatory action regarding climate-related financial risk in derivatives markets.3)
Comments on the AAC meeting
The following comments rely on our notes since the meeting webcast has not been archived yet and the presenters’ slide decks have not yet been posted. Happily, the Chair and Commissioners’ opening statements have been posted.
At the outset of the meeting Chair Rostin Behnam said, “We have an aggressive agenda for our short meeting today.”4 However, to judge by the meeting presentations and the very short time for AAC members to ask questions and propose topics for the next AAC meeting, the wealth of information presented often was not relevant to advising the CFTC on a regulatory agenda, much less an aggressive one, or studies and data collection related to such an agenda. Rather, the overall message of the meeting seemed to be that everything in agriculture derivatives trading is under control, but further improvements are possible. This was the message that IATP took away from the Chair’s characterization of recent market functioning:
Before moving forward, looking back on the last several years of historically high [price] volatility in response to the global pandemic, various extreme weather events, and geopolitical issues, the agricultural futures markets have continuously provided transparent price discovery and accurately reflected supply and demand fundamentals with [cash and futures price] convergence at expiry [of a futures contract]. Our goal should not be limited to ensuring that the derivatives markets continue to serve their risk management and price basis functions. We should examine and explore ways that we can build even greater resilience, usability, access, and availability into our markets and market structures so that the benefits can reach the widest breadth of potential users and market participants.5
Members of the congressional agriculture committees that review the CFTC’s budget proposal and agency performance will find in this praise for futures market performance reason to support an agency that delegates its authority to exchanges according to “principles-based regulation.”
To continue reading the letter, please download a PDF.