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MINUTES OF THE SEPTEMBER 24, 2020 MEETING OF THE

U.S. COMMODITY FUTURES TRADING COMMISSION’S

AGRICULTURAL ADVISORY COMMITTEE

The Agricultural Advisory Committee (AAC or Committee) convened for a public 

meeting on September 24, 2020, at 2:00 p.m. via teleconference in accordance with the 

implementation by the U.S. Commodity Futures Trading Commission (CFTC or Commission) of 

social distancing due to the COVID-19 pandemic. The AAC received an update from the

Livestock Task Force and briefings on second quarter National Farm Loan data and the

impending launch of a Brazil-based soybean futures contract. The meeting included an overview

of the CFTC Division of Enforcement’s Self-Reporting Program and the role of intermediaries

and the National Futures Association (NFA) in protecting market participants from fraud.

AAC Members in Attendance

Buddy Allen, American Cotton Shippers Association

Joe Barker, National Council of Farmer Cooperatives

Chris Betz, Michigan Agri-Business Association

Robbie Boone, Farm Credit Council

Patrick Coyle, National Grain and Feed Association 

Rob Creamer, Futures Industry Association/Principal Traders Group

Robert Crosby, Managed Funds Association

Neil Dierks, National Pork Producers Council

Ed Elfmann, American Bankers Association

Jim Fryer, National Cattlemen’s Beef Association

Edward Gallagher, National Milk Producers Federation

H. Thomas Hayden, Jr., Commodity Markets Council

Matt Hines, American Farm Bureau Federation

Thomas Hogan, Cocoa Merchants Association of America

Ashley Hungerford, U.S. Department of Agriculture (USDA) Office of the Chief Economist

Tom Kadlec, Futures Industry Association

Ron Lee, National Cotton Council of America

Erin Morris, USDA Agricultural Marketing Service

John Owen, USARice Federation

Stephen Strong, North American Export Grain Association

Justin Tupper, US Cattlemen’s Association

Invited Speakers in Attendance

Nate Kauffman, Vice President and Omaha Branch Executive, Federal Reserve Bank of Kansas

City

Alison Coughlin, Director, Commodity Research and Product Development, CME Group

Fred Seamon, Executive Director, Commodity Research and Product Development, CME Group

Tim Andriesen, Managing Director, Agricultural Products, CME Group

Karen Wuertz, Senior Vice President, External Affairs and Communications, NFA

Christie Hillsman, Communications Manager, NFA

Valerie O'Malley, Director, Compliance, NFA

Abigail Campbell, Associate Director, OTC Derivatives, NFA
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Christopher Brettman, CFE, Senior Manager, Business Systems & Information Center, 

NFA

CFTC Commissioners and Staff in Attendance

Heath P. Tarbert, CFTC Chairman and AAC Sponsor

Rostin Behnam, Commissioner 

Dan M. Berkovitz, Commissioner

Brian D. Quintenz, Commissioner

Dawn D. Stump, Commissioner

David Amato, Supervisory Market Analyst, Division of Market Oversight

Christa Lachenmayr, Senior Economist, Division of Market Oversight

Vincent McGonagle, Principal Deputy Director, Division of Enforcement

Summer Mersinger, Director, Legislative and Intergovernmental Affairs, and Designated Federal 

Officer (DFO) and Acting Chair, AAC

Dan Rutherford, Associate Director, Office of Customer Education and Outreach

I. Introduction by the Designated Financial Officer and Chairman

Ms. Mersinger called the meeting to order at 2:00 p.m. She announced that the meeting 

would begin with opening remarks by Chairman Tarbert, the AAC’s Sponsor, and a presentation 

by Mr. Kauffman, and then resume with roll call and opening remarks from other 

Commissioners. Next, CFTC Chairman Tarbert thanked Ms. Mersinger and expressed his 

appreciation for participation by Committee members, presenters, CFTC staff, and the public. 

He emphasized that the agricultural industry is essential to the fundamental needs of everyone 

around the world, and that in his view, the derivatives markets must work for the American 

agricultural sector. Chairman Tarbert noted that when he established the Livestock Task Force 

in April, he said the CFTC’s job is to ensure that the derivatives markets are providing 

opportunities for end-users to manage and mitigate risk, and it has been doing just that. He 

added that the Livestock Task Force has conducted enhanced real-time monitoring of livestock 

markets commensurate with the increased volatility in the cash markets for the underlying

commodities, such as live cattle, feeder cattle, and lean hogs. He thanked the Livestock Task

Force for their work to protect the integrity and functioning of our livestock markets under 

unprecedented circumstances. He added that the Division of Enforcement (DOE) recently 

settled a case with a Mexican meat processing company for violating position limits. He stated 

that events of 2020 demonstrate the importance of all of us working together as partners, so that 

agricultural markets continue to function for price discovery and risk management. 

II. Kansas City Federal Reserve 2

nd Quarter Agricultural Loan Data

Mr. Kauffman gave a high-level overview on agricultural finance based on the Federal 

Reserve Bank of Kansas City’s 2nd Quarter Agricultural Loan Data. He explained that, in 

contrast to the broader economy, U.S. agriculture had been in a prolonged downturn even before 

the pandemic, and then conditions deteriorated rapidly especially in April due to the pandemic. 

Since April, economic conditions in agriculture have improved slightly, due in large part to 

government stimulus payments. Agricultural credit conditions have remained relatively weak, 

but farm real estate markets have provided support. He noted that despite the modest increases 
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in farm income in recent years, challenges remain in agricultural finance, and that—even before 

the pandemic—liquidity was expected to deteriorate alongside low profit margins. He noted that 

the pandemic disrupted agricultural markets beginning in late-March and early-April, resulting

in closures of meatpacking and meat processing facilities. Another major disruption was a 

massive shift in the way consumers buy food products, which led to significant supply chain 

disruptions and ultimately lower farm prices. Starting in April 2020, less travel meant there was

a sharp decline in production and use of transportation fuel, specifically ethanol. Most major 

agricultural commodities also dropped sharply in April. Although many prices have rebounded 

since April lows, they remain lower than at the beginning of the year, with the exception of 

soybeans.

Mr. Kauffman added that delinquency rates on farm loans have trended higher, but 

increases have been modest. He stated that despite the increases in delinquencies, the strength of 

farmland markets has supported agricultural credit conditions and farm balance sheets. He 

concluded that the most severe potential challenges in agriculture connected with the pandemic 

have lessened, for now, but concerns appear likely to reemerge in 2021, as low agricultural 

commodity prices are set to continue to weigh on producer finances, and concerns about 

liquidity and working capital continue. 

III. Opening Statements by CFTC Commissioners

In their opening statements, Commissioners Quintenz, Behnam, Stump, and Berkovitz 

thanked participants for their time and participation. Commissioner Quintenz noted that the 

AAC serves as another tool for the Commission to understand and educate themselves to the 

challenges that the agricultural sector is facing. Commissioner Behnam thanked Ms. Mersinger 

for her work as DFO and Acting Chair, and thanked the Chairman for his leadership, adding that 

it’s good to see business as usual slightly resume as we work towards normalcy. Commissioner 

Stump thanked the DFO for putting together this important meeting in this challenging 

environment. Commissioner Berkovitz noted that there is no substitute for face-to-face and 

interpersonal interactions, but in the interim, the CFTC can continue to meet virtually, and keep 

lines of communication open, so that the Commission can hear from the public and market 

participants regarding what the issues are and how best to respond.

IV. CFTC Division of Enforcement Overview of Self-Reporting

Mr. McGonagle gave an overview of the Commission’s self-reporting program. He 

noted that the interaction of self-reporting, cooperation, and remediation informs how the DOE 

may recommend an enforcement action against an individual or entity. The Commission’s 

mission is to promote the integrity, resilience, and vibrancy of the U.S. derivatives markets

through sound regulation, and enforcement is essential to fulfilling this mission. One way the 

DOE meets its mission is to take steps to maximize deterrence, that is to prevent wrongdoing 

before it starts. DOE can do this through timely identification and prosecution of illegal activity 

and being transparent about the case filings that are made. Timely identification of matters can 

occur through DOE’s surveillance program, regulatory reporting requirements, and analysis of 

tips, complaint referrals from market participants, whistleblowers, and the public. A timely

enforcement response can also occur through effective self-reporting and cooperation. 
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Mr. McGonagle noted that DOE has had advisories on cooperation for approximately 20 

years, which were updated in 2017. A DOE advisory on self-reporting, distinct from 

cooperation, was first issued by the DOE in 2017. He stated that under DOE’s advisory, if a 

company or an individual wants to self-report, they must first voluntarily report the wrongdoing

to DOE, fully cooperate, and then remediate. The disclosure must truly be voluntary and made 

before an imminent threat of disclosure of a government investigation, independent of any other 

legal obligation. It must be a real disclosure, designed to notify DOE of the misconduct. He 

explained that a company seeking to disclose misconduct must fully cooperate throughout the 

investigation, and make contact within a reasonably prompt time after becoming aware of 

misconduct. He emphasized that early reporting of misconduct is better, even without full 

knowledge of all relevant facts or the full extent of the conduct, in order for the company to 

receive full credit for the disclosure, and that the company must continue to investigate and 

disclose additional relevant facts as it becomes aware of them, and take appropriate remedial 

action. He added that cooperation could lead to a recommendation of a substantial reduction in 

the penalty that otherwise would be applicable. Turning to a supplemental advisory on selfreporting and cooperation for Commodity Exchange Act (CEA) violations involving foreign 

corrupt practices issued in 2019, he noted that it applies to companies and individuals not 

registered or required to be registered with the CFTC. He also explained how the level of 

misconduct affects recommendations of civil monetary penalties, and encouraged companies and 

individuals to self-report potential violations of the CEA and regulations. 

V. Livestock Task Force Update

Mr. Amato provided an update from the CFTC Livestock Task Force, which provides

enhanced oversight and surveillance of livestock markets and risks associated with COVID-19. 

He stated that the markets started 2020 with low prices due to the previous year’s weather and 

trade conflicts, and then starting in the first quarter, the American agricultural sector was 

extensively impacted due to COVID-19, resulting in price anomalies, heightened volatility, and 

increased dislocations, such as excess supply of milk and bacon and scarcity of ground beef. In 

addition, the industry was affected by worker illness, packing plant closings, reductions in 

processing, and the effects of the pandemic on the phase one trade deal with China and a rise in 

farm bankruptcies. He stated that the record $37 billion in direct payments from the federal 

government helped sustain farm incomes, rising to 36 percent of farm income. He noted that 

boxed beef prices soared during the virus outbreak. As processing plants struggled during the 

spring to remain open, livestock cash and futures prices fell with the decreased demand for live 

animals. Boxed beef prices are now near historical averages, although this could rapidly change 

if there are outbreaks at packing plants. Mr. Amato stated that, by spring, domestic cattle 

packing plants had high numbers of COVID-19 cases among workers, which caused about three 

dozen livestock processing plants to close, despite being declared critical infrastructure to the 

food supply chain. He stated that the COVID-19 outbreak reduced weekly domestic total cattle 

slaughter numbers by 38 percent from the March high, but has rebounded to almost 45 percent. 

He stated that after the COVID-19 pandemic started, Lean Hog futures fell as much as 40 

percent and Live Cattle futures were down more than 35 percent—a 10-year low. While the 

markets have stabilized, most agricultural products remain lower by approximately 10 to 20 

percent, when compared to January. 
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In response to a question, Mr. Amato noted that futures markets worked and prices 

reacted as expected during and following the volatility of the crisis, and there is still sufficient

liquidity. Asked about the market leading into the April expiration, he responded that the cash 

market was almost stagnant, but the futures market provided the industry with price discovery. 

VI. CME Group South American Soybean Futures Contract

Ms. Coughlin discussed a South American Soybean futures contract (FOB Santos 

Soybeans Financially Settled (Platts)), including its design and purpose. She explained that a 

few decades ago, the U.S. had over 80 percent of global soybean exports, but its share has fallen 

to under 40 percent, with Brazil overtaking it in both bean production and exports, so a 

regionally priced product makes sense. Furthermore, the pricing cycle for the CBOT Soybean 

futures contract does not align with the Brazilian crop, so Brazilian hedgers may not necessarily 

use CBOT Soybean contracts to hedge all of their exposure. She explained that the new CBOT 

South American Soybean futures contract’s settlement index is based on a class assessment of 

the price of soybeans in Santos, so that the daily price reflects the value of Brazilian soybeans, 

which allows market players to stay in the contract through expiration without taking or making 

delivery. Following the presentation, participants discussed the U.S.’s ability to maintain its 

position as the dominant futures markets, noting that CME can discuss it further at another 

meeting. 

VII. The Roles of Intermediaries and the National Futures Association in Protecting 

Market Participants from Fraud

A panel from the NFA discussed the role of intermediaries and the NFA in protecting the 

futures market from fraud. Ms. Wuertz stated that the agenda would include the NFA’s

thorough process to ensure that intermediaries meet both the NFA’s and the CFTC’s rigorous 

standards, the NFA’s robust oversight program, the strong CFTC-NFA regulatory partnership, 

and the important role of investor education and protection. Ms. Hillsman noted that the NFA is 

the industry-wide self-regulatory organization for the U.S. derivatives industry, including

exchange traded futures, OTC derivatives or swaps, and retail off-exchange foreign currency or 

Forex, and its regulatory activity is overseen by the CFTC. 

Ms. Campbell discussed how the NFA and the CFTC work together, and noted that the 

CFTC oversees both NFA formal actions and informal actions. The NFA has regularly 

scheduled coordination meetings with various CFTC Divisions and the Commissioners to ensure 

that the Commission is aware of all NFA activities. Mr. Brettman explained that the CEA 

requires the NFA to establish training standards and proficiency testing for persons involved in 

the solicitation of transactions subject to CEA provisions, and NFA rules require proficiency 

exams for associated persons (APs) engaged in futures and Forex activities. The NFA recently

developed proficiency requirements for APs engaged in swaps. Ms. O’Malley discussed the

NFA’s membership application process, which includes robust review of a firm’s operations, 

including financial information. She also discussed the NFA’s rulemaking process and 

collaboration with the CFTC, as well as how NFA educates its members once rules are 

approved. Ms. Campbell then covered recent rulemaking initiatives that stemmed from the need 
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to develop a swap dealer risk profiling system to identify firms that may pose heightened 

regulatory risk. Ms. O’Malley then discussed some highlights of critical rulemaking pertaining 

to the NFA’s commodity pool operator (CPO) and commodity trading advisor (CTA) members. 

Ms. O’Malley then discussed cybersecurity as it relates to protecting NFA’s systems, to 

ensure protection of customer funds and firm and customer data. She stated that the NFA’s rules 

require members to adopt a written information system security program to address the risks of 

unauthorized access to or attack of their information technology systems and to notify the NFA 

of certain cybersecurity incidents. Ms. Campbell addressed the NFA’s preparation for the 

CFTC’s final swap dealer capital rules, including its focus on approval, oversight, financial 

filing and notifications, and other matters. Ms. O’Malley discussed how the NFA oversees 

members’ compliance with NFA rules and CFTC regulations and investigates possible 

violations, using a risk-based approach and predictive analytics to identify high-risk member 

firms. 

Next, Ms. O’Malley discussed regulatory oversight of futures commission merchants

(FCMs) and Forex dealer members. The NFA is a member of the Joint Audit Committee, and 

one of its primary responsibilities is to determine the practices and procedures to be followed by 

each designated self-regulatory organization (DSRO) in conducting examinations and financial 

reviews of FCMs. She also discussed the NFA’s role in monitoring CPOs, CTAs, and 

introducing broker (IB) members. 

Ms. Campbell discussed the NFA’s swap dealer regulatory oversight program that 

includes conducting compliance examinations and ongoing monitoring. Ms. O’Malley discussed 

NFA rules, member compliance, and its enforcement process, including disciplinary actions 

against its members. She discussed the NFA’s emergency actions called member responsibility 

actions, which are typically issued after fraud is detected and can result in the NFA suspending a 

member or restricting its operations. She stated that when the NFA uncovers a potential ongoing 

fraud, it immediately notifies the CFTC so that it may bring action in federal court, in addition to 

any emergency action that the NFA might take. She also discussed the NFA’s BASIC tool and

its web-based Futures Fundamentals tool, which provide information on the derivatives industry. 

NFA panelists then replied to questions about the NFA’s major technology initiatives, 

how the pandemic has affected the NFA, and NFA examination of international firms. 

VIII. Other New Business

Mr. Rutherford discussed the work of the CFTC Office of Customer Education and 

Outreach, including its new agriculture customer education resources web page. Next, Ms. 

Lachenmayr, the newly appointed CFTC liaison to the USDA, was joined by newly appointed 

AAC members from the USDA to provide updates. She gave an update on the status of the 

recently formed AAC subcommittee which was created to review recent requests for approval of 

amendments to agricultural futures contracts and make recommendations for staff policy, as well 

as provided an update as USDA liaison. Ms. Hungerford discussed cooperative agreements with 

various universities that the USDA Office of Chief Economist has entered into and changes to 

livestock crop insurance programs. Next, Ms. Morris discussed the upcoming USDA Fall Data 
 

 

 

 

 

 

Users Meeting. Responding to a question, Ms. Hungerford stated that Livestock Risk Protection 

(LRP) program for unborn livestock is not required to be part of the Farm Bill, and should be out 

for 2021 policies. 

Hearing no additional questions, Ms. Mersinger adjourned the meeting at 4:52 p.m. 

I hereby certify that the foregoing minutes are accurate. 

_________________________________________ ___________________ 

Summer Mersinger Date 

12/01/2020

AAC Acting Chair and Designated Federal Officer 

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