House lawmakers considered agricultural stakeholder perspectives on the reauthorization of the Commodity Futures Trading Commission (CFTC) during a House Agriculture Subcommittee hearing on July 25.
Congress periodically reauthorizes the CFTC to update the agency’s authorities and recommended spending levels. The last reauthorization of the CFTC occurred during the 2008 Farm Bill and expired in 2013. NGFA and other stakeholder groups support reauthorization as it acknowledges CFTC’s important mission and provides market participants with greater certainty about the agency’s direction and priorities.
Travis Antonsen, senior vice president of grain marketing and rail logistics at Agtegra Cooperative, and a current member of the NGFA Risk Management Committee and former member of the NGFA Board of Directors, provided testimony at the hearing.
As the committee considers reauthorization, Antonsen cautioned against the imposition of any type of user fee on the industry to fund the CFTC. “We fear a further increase in cost structure due to higher transaction costs would discourage prudent hedging practices,” he said. “In addition to lower farm gate prices farmers would receive, a user fee would result in an increase in risk being absorbed in the agriculture community in general, and would likely reduce the desire for participants, such as agricultural producers, to hedge their price risk.”
Antonsen also said he appreciated the CFTC’s engagement with bank regulators on proposed rules to increase capital requirements. “We are optimistic to hear that those agencies recently signaled their willingness to take another look at those proposals,” he noted.
In September 2023, the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) proposed a rule to increase the capital requirements applicable to large banking organizations and those with significant trading activity. The Board also issued a separate proposal that identifies and establishes risk-based capital surcharges for global systemically important bank holding companies (GSIBs). In comments submitted Jan. 16 to the banking agencies, NGFA said the proposals would increase costs for accessing cleared derivatives markets.
“U.S. banks are major contributors to the clearing system, and we are concerned a contraction in the availability of clearing services will have a disproportionate impact on agriculture,” NGFA noted. “If the proposals are implemented as currently drafted, NGFA is concerned GSIBs will cease providing futures commission merchant (FCM) services.”
Jay Powell, chair of the Federal Reserve, told lawmakers earlier this year that he expects “broad and material changes to the proposal” when he provided testimony on monetary policy to Congress in March.