THREE new faces who hope to serve as commissioners of the Commodity Futures Trading Commission (CFTC) sat before the Senate Agriculture Committee March 6.
The nominees — Timothy Massad, Sharon Bowen and J. Christopher Giancarlo — each gave solid indications that they see the importance of gaining a better understanding of agriculture within an agency tasked with regulating end users in the larger financial market.
None of the three nominees have any agricultural experience, so ahead of the hearings, a coalition representing nearly every facet of the agriculture industry was busy educating lawmakers and making sure that agriculture's voice would not be lost. It seemed to work.
Massad, who has been tapped to succeed outgoing CFTC chairman Gary Gensler, has most recently overseen the Troubled Asset Relief Program. He said over the course of his career, he has seen how important hedging forms of risk are for everyone in agribusiness, from fertilizer companies to rural electric cooperatives.
Bowen reiterated that markets must work for farmers, be "balanced and not create undue costs and burdens." She also voiced hopes to protect against excessive speculation.
Giancarlo, the only Republican nominee, said he is open to increasing his knowledge of the agriculture sector. Despite comprising only 10% of the interests represented under CFTC's oversight, he said agriculture still is "very important" and he'd be in favor of getting out into the field to meet with constituents on agriculture-related issues.
Sen. Saxby Chambliss (R., Ga.) asked why CFTC's Agricultural Advisory Committee has met only once since 2011. The committee was created 20 years ago to ensure that the commissioners understand agricultural futures and options trading and to facilitate communications between the industry and CFTC.
Massad pledged to make sure the committee gets a new chair and a regular meeting schedule, and Giancarlo added that he would be "honored" to serve as its chair.
Todd Kemp, vice president of marketing and treasurer for the National Grain & Feed Assn. (NGFA), said reinstating the committee would be a "positive step" and a "good forum to get issues of concern out on the table."
Areas of concern
During an exchange with Massad, Chambliss expressed his concern that CFTC has gone too far in regulating commodity end users.
Massad confirmed that commodity end users should be treated differently from financial end users and that he intends to ensure that CFTC takes the appropriate action to follow the Dodd-Frank financial reform law as Congress intended the legislation to be interpreted.
One of the common threads among questioning from the Senate Agriculture Committee members was related to the proposed rule on position limits. CFTC has re-proposed the rule, and the comment period closed at the end of February.
Massad said he plans to make it a priority to finalize the rule on position limits. Giancarlo added that he hopes all of the comments received are carefully considered before a final rule is issued to ensure that end users have the proper exemptions they deserve while not creating new loopholes.
Giancarlo noted that he doesn't want to prejudge without evaluating the extensive comments received, but he said his decision-making will be very data driven on how and why levels are set.
In its comments, NGFA said redefining what constitutes "bona fide" hedging could create uncertainty and invalidate several commonly used hedging transactions, including locking in futures spreads, hedging basis contracts and delayed-price commitments and anticipatory hedging of commercial transactions and processing or storage capacity.
Kemp said the proposed rule draws a box that takes a one-size-fits-all approach for agricultural, energy, metal and financial products.
"Even within the agricultural commodities, grain and oilseed markets display characteristics differently from other agricultural commodities. We urge the CFTC to recognize these unique characteristics — functionally and in terms of market size and participants," NGFA said in its comments.
Senate Agriculture Committee chair Debbie Stabenow (D., Mich.) said she expects the committee to vote on the CFTC nominees before the end of March.
Some speculation remains as to how the nominations would proceed to the full Senate floor, but they could come together as a package vote.
Committee members didn't pose any immediate objections to the nominees, but Kemp said politics can never be ruled out with the invocation of the so-called "nuclear option" by Senate majority leader Harry Reid (D., Nev.) under which a simple majority is needed for confirmation rather than the traditional filibuster-proof 60 votes. Republicans could object or seek to delay the process, or Democrats could throw up roadblocks to the Republican nominee.