CFTC Agricultural Advisory Committee Meeting
Commodity Futures Trading Commission
Agricultural Advisory Committee Meeting
Wednesday, April 22, 2020
Opening Statements
Chairman Heath P. Tarbert
In his opening statement, Tarbert praised the members of the Agricultural Advisory Committee for their efforts in continuing to feed America throughout this pandemic and emphasized the critical role that the agricultural sector plays in our economy. He noted the timeliness of this discussion as well as his belief that it will help the Commission better understand the challenges facing the agricultural community in order to better ensure that the derivatives markets are doing their job of providing opportunities for end users to manage and mitigate risk. Tarbert then commented on recent Commission action such as the establishment of a livestock markets task force that is monitoring in real time contracts such as Live Cattle, Feeder Cattle, and Lean Hogs as well as the decision to appoint a CFTC Liaison to the U.S. Department of Agriculture.
The Honorable Sonny Perdue, U.S. Secretary of Agriculture
In his opening statement, Perdue began by lauding the work of the Commission as well as their coordination with the U.S. Department of Agriculture (USDA). He also praised the members of the Agriculture Advisory Committee, as well as the agriculture community writ large, for their work throughout this crisis, especially as it pertains to efforts to reallocate the supply chains that previously supplied food services in order to better serve the retail grocery market. He emphasized that USDA is working to bring relief to producers who have been negatively impacted by the spread of COVID-19 in addition to monitoring any supply and demand disruptions or divergences.
Commissioner Brian D. Quintenz
Quintenz echoed the praise provided by Chairman Tarbert and emphasized the special role that the Commission occupies in ensuring that American farmers and ranchers can depend upon liquid, well-functioning agricultural futures and swaps markets to hedge their risks. He concluded by encouraging market participants to voice any concerns regarding the performance of futures contracts.
Commissioner Dan M. Berkovitz
Berkovitz praised Secretary Perdue for both his understanding of the markets as well as his efforts in support of such markets. He stated that as the COVID-19 pandemic continues to create additional challenges in the agricultural community, it is of the utmost importance that commodities markets continue to serve their primary purposes of providing risk management and price discovery.
Presentations
Market Statements by Exchanges
- Derek Sammann, Global Head of Commodities & Options Products, CME Group
- David Farrell, Chief Operating Officer, ICE Futures US
Sammann commented on the unprecedented disruptions in the agriculture markets due to COVID-19 before summarizing CME’s recent action to widen daily price limits to better ensure convergence across livestock contracts as well as their consistent monitoring of products to make them more efficient for end-users. He concluded that CME continues to closely work with the agriculture industry to make sure that products remain useful as effective hedging tools.
Farrell summarized the importance of futures in the agriculture community as they provide risk management, price discovery, as well as a buyer/seller of last resort that allows convergence. Of note, he stated that throughout April, ICE has observed a return to average trading activity following the earlier spikes in both volume and volatility due to COVID-19.
Q&A
In response to a question regarding how the Commission is working to ensure that markets are functioning properly, Tarbert reiterated that they are continuously communicating with the exchanges, clearinghouses, and market participants to expediently understand market developments. He elaborated that the Commission is also working with other bodies of the U.S. government, as well as counterparts overseas, to ensure that this health crisis does not become a financial crisis.
Sammann and Farrell both took the opportunity to state that the current regulatory framework has allowed both entities to continue their core functions of providing risk management and price discovery.
Dave Amato, CFTC, and Dr. Robert Johansson, USDA, both stated that markets are functioning relatively well given the circumstances but continued that supply chain monitoring efforts remain an area of focus, especially as it relates to the continued operation and safety of packing plants.
Johansson briefly touched on the status of the U.S.-China Phase I trade deal, stating that USDA is still moving forward on a variety of fronts as it relates to this agreement but that progress has been slowed due to the COVID-19 crisis. He specifically noted that the U.S. has until December to reach the agreed upon purchase amounts.
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