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Senate Agriculture Committee Passes Chairman’s Mark on CFTC Reauthorization

WASHINGTON, D.C. - U.S. Senator Pat Roberts, R-Kan., Chairman of the Senate Committee on Agriculture, Nutrition and Forestry, today held a business meeting where the Chairman’s Mark to reauthorize the Commodity Futures Trading Commission (CFTC) was favorably reported out of the Committee on a 11-9 vote. Due to scheduling, the final vote occurred off the Senate floor. The manager’s package was considered as part of the underlying bill text without objection. 

The Chairman’s Mark addresses many concerns of end-users, including farmers and ranchers who use derivatives and futures contracts to manage risks. These end-users are not speculators or risk-takers, yet they withstand the worst consequences stemming from the implementation of recent regulations. 

This Chairman’s Mark has the widespread support of state and national agricultural organizations and businesses. This is the first time in over 10 years this Committee has held a markup for CFTC reauthorization. 

The Senate Agriculture Committee last May held a hearing on regulatory issues impacting end-users and market liquidity. The hearing featured testimony from CFTC Chairman Timothy Massad, as well as a variety of end-users from across the country who gave accounts of how their businesses are facing barriers as they attempt to enter the markets. 

To read the draft legislation and watch the business meeting, click here

The following is Chairman Roberts’ opening statement as prepared for delivery: 

I call this business meeting of the Senate Agriculture Committee to order.

I welcome my colleagues as we consider legislation to reauthorize the Commodity Futures Trading Commission (CFTC), ensure protections of futures customers, as well as provide much needed relief for farmers, ranchers, and end-users who rely on these risk management tools to keep their operations and businesses above water during these times of high volatility.

Before I begin my opening statement, members should be aware that, as is customary, with business meetings, all members will have the opportunity to give opening remarks or submit them for the record. 

I also note that our committee rules require a quorum to be present when voting.  Out of respect for your demanding schedules, once we have reached a quorum I will ask members to hold their opening statements or submit them for the record so that we may move to consideration of any amendments and then a final vote. 

Today is truly a historic day for the Senate Ag Committee, as the last time the Committee held a markup to reauthorize the CFTC was over ten years ago. That’s right – 10 years. Additionally, CFTC’s authority expired almost three years ago. Obviously, it’s time for us to act.

Before we dive into the details of the Chairman’s mark, let me remind folks what events led us here and why this committee…the Agriculture Committee… needs to take action.

First, we need to examine who we are working to help and why they need our help. “End-Users” is the common term describing market participants who use derivatives and futures contracts to manage risks.  Those market participants include farmers and ranchers who this committee knows well.

It also includes the businesses and co-ops that help those producers take their harvests to market…a global market at that. 

As the futures and derivatives markets have grown to include a producer’s input costs, like fuel and fertilizer, so too has the producer’s risk management toolbox. More options for managing risk is a good thing.

Just look at the volatility in the U.S. corn price. A few years ago farmers enjoyed prices over $7.00 a bushel.  Now, that same bushel is under $4.00. Again these producers along with those up and down the market chain are who the Chairman’s mark aims to help.

Now let’s look at what brought us here today. 

In 2008 a financial crisis hurt the entire economy, including those “end-users” I described. Congressional reaction to the crisis led to sweeping regulatory change. Many of us here raised a concern at the time that the legislation being considered would negatively impact those who had nothing to do with the causes of the 2008 crisis…and this was a bipartisan concern.

Yet when Dodd-Frank became law, and the CFTC then led by Chairman Gensler, began writing new regulations, it was in fact that farmer, that rancher, that county grain elevator manager who felt the heavy hand of over-regulation come down on them.  

It has been eight years since the crisis, six years since the bill was passed, and yet there has been no action from this Committee to address the impacts on end-users, farmers, and ranchers from Dodd-Frank regulation. Today, that changes.

During our hearing last year, we clearly heard from constituents who described in detail the regulatory overreach stemming from the implementation of the Dodd-Frank Act. The Chairman’s mark, titled the Commodity End-User Relief Act, proposes a compromise and a responsible solution to providing regulatory certainly to “end-users” while increasing customer protections. I’ll discuss a couple of examples of how the bill does just that.

When writing one of the rules mandated by Dodd-Frank, the CFTC unfortunately limited a routine risk management practice by restricting what is considered a true bona fide hedge.

A local grain elevator needs to be able to hedge inventory it may receive when the markets are closed, such as on a Saturday, so they can provide the best price to the farmer. Also, a grain company needs to be able to manage their hedges during volatile market conditions. The Chairman’s mark allows for anticipatory hedges and the management of a hedge when it serves as a risk management tool for our producers and commercial end-users and NOT an investment or for speculation.

It is our duty to make it easier for those participants who are literally “on the ground” to hedge or protect themselves, especially with all of the recent market volatility that we hear about from our constituents.

I know that Congress created the Dodd-Frank mandate to regulate speculators and investors. It did NOT intend to regulate true hedgers in the market. The Chairman’s mark does not argue that there should not be a new position limits regime in place.  t merely clarifies that farmers, ranchers, and end-users should be able to continue to use the markets as they have done before Dodd-Frank and in many prior decades. 

I will say it again, these folks did not contribute nor were they ever responsible for the 2008 financial crisis, so why have they been regulated as if they were part of the problem? 

Well, it’s pretty simple. Do you want to fight for the wheat farmer that is trying to lock in a favorable price for his crop with his local grain elevator? Do you want to stand up for those who put food on our table, affordable gas in our cars, and provide electricity and heat to our homes?  Or do you support unnecessary and over burdensome regulation? That’s a pretty simple answer, folks.

Here’s another example of how the Chairman’s mark provides relief through common sense and compromise. The CFTC has repeatedly stated that the Commission did not have the appropriate data or sound evidence when they determined what the level of Swap Dealing activity would be to trigger registration. The Chairman’s mark directs CFTC to complete a study on setting that level before adjusting the current policy.  This ensures that the market will not be further disrupted until an appropriate level is determined. That just makes sense.

I know that there are those who believe the level should be lowered, and I am not here to argue with their opinions. The Chairman’s mark ensures proper due diligence is taken and that the final regulation is based on proper evidence. 

Overall, the mark before us today addresses this regulatory overreach and provides much needed clarity and relief for our folks on the ground as well as putting in place appropriate customer protections in the wake of the disasters of M.F. Global and Peregrine Financial.

It is clear that we should not withhold needed regulatory relief for our farmers, ranchers, and risk management service providers any longer.

I appreciate the support of those on the Committee who will join me in standing up for American farmers, ranchers, and end-users by voting for this legislation. 

I now turn to my colleague, Ranking Member Stabenow, for her opening remarks.