UNDER this Administration, the Commodity Futures Trading Commission (CFTC) has fundamentally changed to one that doesn't view agriculture any differently from other market participants, raising concern among major agricultural commodity groups.
Of the five-member commission, three seats will need to be filled by the end of the year. These departures create a unique opportunity to recast CFTC in this new era via the appointment of three new commissioners, the industry groups said.
Republican commissioner Jill Sommers left earlier this year, and Democrat commissioner Bart Chilton announced recently that he will step down from his post "in the not-too-distant future." In addition, on Nov. 12, the President officially nominated Timothy Massad to replace CFTC Chairman Gary Gensler.
Because futures markets were created to hedge price exposure in agricultural commodities, CFTC began its existence as part of the U.S. Department of Agriculture in 1922. It existed as the Grain Futures Administration within USDA until becoming an independent agency in 1974.
Eighteen major agricultural commodity and livestock groups sent President Barack Obama a letter stating that while futures have grown beyond agricultural commodities and CFTC's regulatory footprint has recently expanded into swaps, "the agricultural futures markets remain as integral to our businesses as they were before the financial innovation that led us to today's derivatives markets."
Throughout the agency's existence, there have always been commissioners that intricately understood agricultural futures markets as well as the underlying physical markets.
The letter explained that Chilton had an extensive agricultural background, having worked on agricultural policy issues in the Senate and USDA before taking a key position at an agricultural trade group.
"His departure leaves the agricultural industry without a commissioner with background in our market sector," the letter added.
The groups said it is "critically important" to nominate at least one of the vacant commissioner seats to an individual with a working understanding of agricultural futures markets and the ag industry."
"The vote on the customer protection rule served to remind a lot of us that there really is no understanding of concerns unique to agriculture," someone involved in both the agriculture coalition effort on the customer protection rule and coalition letter about the nominees explained, adding that CFTC's customer protection rule could greatly disadvantage farmers, ranchers and small agribusiness hedgers.
While some feel that if the financial sector can adapt to new technologies, why can't the agriculture sector do the same, agriculture has its unique issues. "One size can't fit all, and that's what they've been trying to do for the past several years," the industry member said of CFTC.
Obama nominated Massad to succeed Gensler, who must leave the agency before the end of the year.
For the past few years, Massad has been tasked with overseeing the Troubled Asset Relief Program at the U.S. Department of the Treasury.
Massad reportedly is somewhat more of a consensus builder than Gensler, which the agricultural groups would prefer as split votes have become politicized rather than looking for a compromise.
However, instead of a background in agriculture, Massad specialized in corporate finance and worked on Wall Street prior to his time at the treasury department.
The Senate Agriculture Committee is in charge of approving nominees. Senate Agriculture Committee chair Debbie Stabenow (D., Mich.) said she looks forward to working with the White House and CFTC as the Senate proceeds with the confirmation process and nominees are fully vetted.
"This is an important time for the CFTC as they finish implementing new rules as part of the Dodd-Frank reforms and continue addressing the challenges of a changing marketplace," she said.