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Commodity Futures Trading Commission Agricultural Advisory Committee Meeting – 7.29.26

August 11, 2026 Uncategorized

COMMODITY FUTURES TRADING COMMISSION 

AGRICULTURAL ADVISORY COMMITTEE 

On July 29, the Commodity Futures Trading Commission (CFTC) held an Agricultural Advisory Committee (AAC) meeting, with the agenda available here and the AAC member list available here.  Session topics included the Basel III proposal, Commitment of Traders (COT) reports, risk management tools for agricultural end-users, and 24/7 trading and emerging markets.  Public comments in connection with the meeting must be submitted by August 7, 2026. 

KEY TAKEAWAYS

  • CFTC Chairman Selig framed the meeting around ongoing efforts to right-size post-Dodd-Frank regulation, modernize COT report processing and dissemination, expand market access for agricultural producers, and take a case-by-case rather than one-size-fits-all approach to novel products. 
  • Section I discussions highlighted the 2026 Basel III proposal as an improvement over the 2023 version.  AAC members raised varying concerns about its impact on agricultural market access, including that capital tradeoffs could lead bank futures commission merchants (FCMs) to deprioritize agriculture-related business, and that the more fundamental issue is how existing capital gets allocated rather than capital adequacy itself. 
  • Section II centered on Chairman Selig’s announcement that COT reports will begin being published on a biweekly basis by the end of the year.  AAC members commended the CFTC’s announcement, with comments detailing support for the increased reporting frequency and modernization efforts while emphasizing the importance of maintaining transparency, data usability, and confidentiality.   
  • Section III featured a panel of agency representatives on potential gaps in risk management tools for agricultural end users, with panelists outlining existing agricultural risk management tools and producer program access.  AAC members discussed whether emerging products, including event contracts, could serve as effective risk management tools for agricultural producers. 
  • Section IV opened with a presentation on perpetual futures’ contract structure, index and funding rates, and liquidation.  AAC members discussed perpetual futures and 24/7 market trading for agricultural markets, examining their potential implications for market structure, liquidity, price discovery, and agricultural risk management. 

INTRODUCTIONS & OPENING REMARKS 

Michael Selig, Chairman, Commodity Futures Trading Commission  

Complete remarks available here.  

  • Stated that his goal is to ensure regulation does not overregulate the marketplace or hinder industry growth and innovation, working to future-proof the CFTC’s regulatory approach. 
  • Noted that federal agencies have layered regulation onto financial intermediaries servicing agriculture without asking whether the rules work for farmers, ranchers, or producers. 
  • Stated that many FCMs, swap dealers, and commodity trading advisors that agricultural participants rely on are owned by banks subject to capital requirements, and are separately regulated by the CFTC and NFA. 
  • Cited that by the end of 2016, the CFTC had finalized nearly eighty new regulations under Dodd-Frank, and that the number of FCMs shrank from roughly ninety before 2007 to fewer than fifty  today. 
  • Reiterated that the administration has ended the prior administration’s one-size-fits-all approach to financial regulation and is instead pursuing a deregulatory agenda targeting rules that no longer serve their purpose. 
  • Announced he has directed CFTC staff to begin circulating the Commitments of Traders (COT) report on a biweekly basis rather than weekly, with a goal of starting by the end of the year. 
  • Said the CFTC has ended the prior administration’s approach of regulation by enforcement, with the Commission’s Enforcement Division now focused on fraud, manipulation, and abuse rather than technical or minor compliance issues. 
  • Referenced that the CFTC is working with USDA to finalize a memorandum of understanding to improve interagency coordination and expand producer access to risk management tools. 

SECTION I: BASEL III PROPOSAL 

Presentation on Basel III Proposal 

Office of the Comptroller of the Currency (OCC), Federal Reserve Board (FRB), and Federal Deposit Insurance Corporation (FDIC) 

  • Raised how in March 2026, the OCC, Federal Reserve, and FDIC approved two notices of proposed rulemaking (NPRMs) modifying regulatory capital requirements for banking organizations.  Noted the public comment period for both proposals closed June 18, 2026, with over 400 comments received and under agency review. 
  • Described the first NPRM on the Basel III proposal as applying to the largest, most complex banking organizations, based on the 2017 Basel agreement with adjustments for the U.S. market and lessons from a 2023 proposal that was not finalized.   
  • Outlined the second NPRM, standardized approach proposal, as applying to all other banking organizations, intended to align with Basel III calibrated capital requirements while maintaining a simpler framework. 
  • Explained that under current rules, the largest banks must calculate capital requirements twice, with standardized and internal-models-based approaches, and hold the higher amount.  Cited that the 2026 proposals would remove this dual-calculation requirement. 
  • Said the 2026 proposal reduces barriers to using internal risk models, subject to regulatory approval, and raises the activity-based thresholds triggering use of the market risk and credit valuation adjustment (CVA) frameworks. 
  • Discussed how the 2026 proposal would allow large banks to recognize risk-reducing benefits of qualifying cross-product netting arrangements for derivatives and certain repo-style transactions.  Cited that this is a change not included in the 2023 proposal. 
  • Explained the 2023 proposal would have required a CVA capital charge on client-facing cleared derivative transactions, which was criticized as inconsistent with the accounting treatment of those exposures. Referenced how the 2026 proposal instead removes the CVA capital requirement for client-facing cleared derivative transactions. 
  • Noted the existing rule includes a lower risk multiplier for commercial end users, which the CVA framework proposal builds on. 
  • Referenced how the agencies included questions in the proposals soliciting feedback on risk sensitivity, including for clearing-related activities and transactions with non-financial counterparties. 

AAC Member Discussion on Facilitating Access to Clearing & Basel III Proposal 

  • Radhakrishnan (ABA) raised that imposing capital requirements at the bank holding company level effectively double-penalizes firms, since FCMs already hold significant capital, arguing that penalizing bank holding companies unfairly disadvantages them competitively. 
  • Neale (FIA) discussed that if bank FCMs offering cross-product netting hold lower margin balances, additional capital requirements imposed by prudential regulators create a mismatch requiring business decisions.  He said he expects agriculture-related business to rank lower in priority for bank FCMs facing these tradeoffs, resulting either in costs passed to customers or FCMs cutting lines of business.  He noted that continuing on the trajectory of the 2023-style proposal without changes would likely leave agriculture with less choice and service. 
  • Prosser (AAC Chair, Scoular) asked whether, if bank FCMs become more selective or exit the market, there is adequate capacity and capital among non-bank FCMs to accommodate increasing demand. 
  • Barker (NCFC) noted how agriculture’s ability to access FCMs and markets has dropped dramatically in recent years, citing the reduction from ninety to fifty  FCMs referenced by Chairman Selig.  He stated there is adequate capital in the system overall, but that capital allocation, not capital availability, is what is limiting agricultural producers’ market access. 
  • CFTC Chairman Selig called the 2026 proposal a strong step in the right direction to address issues from the prior administration.  He said the CFTC will continue working with prudential regulators to address concerns raised, with a focus on reducing burdensome rules limiting farmer, rancher, and producer access to FCMs and markets. 

SECTION II: COMMITMENTS OF TRADERS (COT) REPORTS 

Presentation on Commitments of Traders (COT) Report 

Jessica Harris, Director, CFTC Division of Data  

  • Explained how COT reports are built from daily position data collected from roughly 300 reporting firms and reconciled against exchange data, with traders classified by primary market purpose. 
  • Reported usage statistics, with the CFTC.gov COT page receiving approximately 195,000 views per month; the public reporting environment receiving approximately 110,000 views/month; and API calls on the public reporting environment for COT exceeding 6.5 million. 
  • Referenced how the CFTC recently solicited public comment on potential COT program updates, receiving over 100 comments with the key themes of protecting confidentiality, modernizing where appropriate, and improving usability. 
  • Outlined how commenters raised interest in expanded formats, harmonized historical classifications, and more user-friendly data schema, while emphasizing that increased detail must not reveal proprietary trading activity.   
  • Emphasized that any modernization will be grounded in three commitments: stability in protecting long-running data sets, confidentiality in not compromising trade or proprietary information, and transparency with purpose. 

AAC Member Discussion on COT Reports

  • Multiple AAC members commended the CFTC’s responsiveness to industry feedback on COT reports, voicing support for its modernization while emphasizing the importance of maintaining transparency, confidentiality, and usability. 
  • Donovan (Bunge) raised concern about the impact of disruptions (e.g., government shutdowns) on COT release schedules and their effect on market discovery, and asked whether expediting delayed reports could be considered for future changes.  Harris responded that such feedback is being incorporated into efforts to increase reporting frequency and speed. 
  • Afolayan (Cargill) said that even analytically sophisticated firms experienced difficulty gauging market sentiment during a prior absence of COT reports, underscoring the report’s importance, and requested continued focus on increasing both report frequency and reducing the lag between data cutoff and release. 
  • Smith (PTG) called the frequency change a positive first step and asked what additional resources or changes would be needed to further increase COT frequency.  Harris responded that the CFTC is modernizing data ingestion infrastructure, that the large trader report is moving to a new (FIX) format next year, and that reconciliation and classification processes are being automated to reduce manual work.  She also noted that the CFTC is examining publishing COT to the public reporting environment faster than to CFTC.gov.  
  • Allen (ACSA) raised a separate, longstanding concern regarding the Cotton On-Call report, noting cotton is the only market subject to that additional weekly report, and asked to continue engaging with CFTC staff on the matter.  He said that there is no clear industry consensus on whether to sunset public dissemination of the report and that a careful examination of its merit is warranted given its potential impact on hedgers. 

SECTION III: POTENTIAL GAPS IN RISK MANAGEMENT TOOLS FOR AGRICULTURAL END USERS

Panel: Potential Gaps in Risk Management Tools for Agricultural End Users  

Panelists: Heather Manzano, Associate Administrator, USDA Risk Management Agency (RMA); Mary Catherine Cromley, Senior Advisor, USDA Farm Production and Conservation (FPAC); Dr. John Newton, Vice President of Public Policy and Economic Analysis, American Farm Bureau Federation; Kate Thompson, Director of Government Affairs, National Cattlemen’s Beef Association; Brandon Wipf, Board Member, American Soybean Association; Matt Frostic, First Vice President, National Corn Growers Association 

  • Manzano (RMA) referenced how RMA administers the Federal Crop Insurance Program (FCIP), a roughly $200 billion program covering crops and livestock nationwide, with market penetration for major row crops in the high ninety percent range.  
  • Cromley (FPAC) outlined how the Farm Service Agency’s (FSA’s) core programs are Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC), based on historical plantings.  She noted the One Big Beautiful Bill Act increased reference prices and added base acres for producers without historical base, alongside marketing assistance loans and loan deficiency payments to help producers time sales around price movements. 
  • Dr. Newton (AFBF) said most farmers rely more on crop insurance and Farm Bill tools than on direct use of futures given the upfront cost of margin accounts versus insurance premiums and that farmers often cannot react quickly enough to fast-moving markets following market-moving reports.  
  • Thompson (NCBA) said members use both USDA programs and futures and options markets, described Livestock Risk Protection (LRP) and the Livestock Indemnity Program (LIP) as critical complements to futures markets, and said NCBA has formed an LRP task force exploring expanded coverage.  
  • Frostic (NCGA) cited a new NCGA report finding U.S. growers pay more than Brazilian competitors for inputs.  He flagged margin pressure, limited input cost transparency, and gaps in existing margin protection tools tied to county-level rather than producer-level losses and misaligned deadlines.  He noted how fertilizer futures liquidity is concentrated in large contract sizes, leaving smaller farms without an effective way to hedge input costs. 

AAC Member Discussion on Potential Risk Management Gaps 

  • Barker (NCFC) raised concern about inconsistent acreage estimates across the National Agricultural Statistics Service (NASS), RMA, and FSA, citing the corn planted-acres figure being changed in February for the prior spring’s crop, asked whether reporting could be streamlined the way the COT report was.  Cromley (FPAC) said acreage reporting modernization at FSA is a first step under the One Farm, One File initiative and that a pilot program has been running for the last few months with plans to roll out nationally.  
  • Boone (FCC) stated that derivatives are a tool in the toolkit but that crop insurance remains the primary tool for much of Farm Credit’s membership.  Weston (ASA-Sugar) noted the crop insurance program baseline was set around a billion dollars a year in 2002 policy updates and has since seen exponential growth, calling markets effective self-regulatory organizations (SROs). 
  • Afolayan (Cargill) asked Cromley and Manzano whether current insurance product design needs to be simplified or augmented to give farmers confidence planting new crops tied to biofuel opportunities, including intermediate and novel oilseeds and cover crops, citing pro-growth, pro-farmer biofuel legislation and the upcoming RFS Set 3 segment.  Manzano (RMA) responded that RMA has approved several products in the oilseed area, with data availability remaining a challenge.  She also said that RMA relies heavily on insurance companies and agents for direct producer outreach, inviting feedback on any gaps in service. 
  • Prosser (AAC Chair, Scoular) asked whether event contracts on prediction market platforms could help fill risk management gaps like weather, yield, and disease.  He cited the historical Iowa/USDA corn yield contract from the 1990s as an early example of an event contract using USDA data as an objective settlement reference.  
  • Sammann (CME Group) said CME is constantly talking to customers about unmet risk management needs, citing cattle-on-feed, acreage, and yield as examples raised.  He stated CME evaluates product fit, hours, natural participants, and legitimate risk management needs before developing new products.  Boone (FCC) stated that the standard for new products should be whether they improve a producer’s ability to manage an actual business exposure, not simply whether a new contract can be created. 
  • Barker (NCFC) said the binary payout structure of event contracts limits their effectiveness for hedging planted acres, suggesting a non-binary payout structure instead.  Donovan (Bunge) raised concern about a trend toward binary-outcome trading disconnected from price discovery tied to underlying reports. 
  • Betz (Michigan Agri-Business Association) questioned how much adoption event contracts would get, pointing to CME’s smaller fertilizer contracts as a similar product that has struggled with adoption.  He explained how land-grant institutions have studied futures and options for decades to teach optimal hedge ratios, warning event contracts could encourage speculative positioning inconsistent with bona fide hedging and need more research before wider adoption. 
  • Thompson (NCBA) cited a lack of producer awareness on product offerings and use, with an LRP task force working on outreach.  Newton (AFBF) noted cross-training brokers as insurance agents has helped in livestock but less so in row crops, with Frostic (NCGA) saying that crop insurance agents remain the most effective education channel.  Manzano (RMA) and Cromley (FPAC) said they are expanding outreach and eligibility tools but rely heavily on external partners given limited staff capacity.  

SECTION IV: 24/7 TRADING & EMERGING MARKETS 

Presentation on Perpetual Futures’ Funding Rate Mechanism 

  • Smith (PTG) gave an educational overview of perpetual futures, explaining that they are derivative contracts with no expiration or contract rolls, allowing positions to be held indefinitely, with a funding rate mechanism substituting for the convergence that traditional futures achieve at maturity. 
  • Smith referenced how perpetual products found market fit in offshore digital assets and became the dominant derivatives contract by trading volume, available 24 hours a day and 7 days a week.  He cited how, in May 2026, the CFTC approved the first on-shore U.S. perpetual futures contract, the BTCPERP Contract. 
  • Smith outlined how funding payments are periodic transfers directly between long and short market participants, not fees charged by the exchange, calculated by comparing the perpetual futures price to an index price as a weighted average across multiple spot exchanges.  He said the further the perpetual price diverges from the Index Price, the stronger the economic incentive to trade it back toward fair value. 
  • Smith described a related mark price, derived from the index price plus a premium or discount adjustment, used to calculate unrealized P&L and determine liquidations, which reduces unnecessary liquidations caused by a temporary price spike on a single venue. 
  • Smith walked through a numerical example of funding payments transferring between long and short positions when perpetual futures trade at a premium or discount to the underlying index. 
  • On auto-liquidation, Smith said open orders are canceled once a position breaches maintenance margin, the position is closed via a market order, and any residual loss is absorbed by the venue’s backstop.  He noted that liquidation structures, including insurance funds, socialized loss, auto-deleveraging, vault-plus-insurance-fund, and derivatives clearing organization (DCO) default waterfall, vary across venues. 
  • Smith explained how U.S. perpetuals operate through the traditional FCM/designated contract market (DCM)/DCO model with lower leverage and an eight-hour funding cycle, with availability currently limited to crypto, versus offshore venues offering broader asset classes, higher leverage, and different liquidation and deleveraging mechanisms. 
  • Smith contrasted the registered U.S. centralized exchange model of full CFTC/DCM oversight, FCM segregated collateral, DCO clearing, and a DCO default waterfall with unregistered centralized and decentralized offshore exchanges. 
  • Smith said understanding the funding mechanism is central to evaluating the product, framing the open policy questions as whether U.S. investors adopt perpetual futures, whether other exchanges launch competing products, and whether perpetual futures expand into traditional asset classes. 

AAC Member Discussion on Perpetuals, 24/7 Trading, & Emerging Markets 

  • Hayden (CMC) opened with how the underlying purpose of the Commodity Exchange Act is price discovery and risk management, both of which traditional ag futures derive from contract expiration, physical delivery, and convergence.  He questioned how a perpetual’s funding rate would factor in the calendar spreads that send important signals to producers and end users, warning this would negatively impact convergence. 
  • Radhakrishnan (ABA) asked whether the funding rate mechanism takes the place of daily mark-to-market, which Smith clarified it does not, and asked whether long positions pay short positions when the perpetual contract trades above the index price.  He also raised the practical question of weekend mark-to-market given Fedwire’s Monday-Friday operating hours and certain banks not being open on weekends, suggesting over-collateralizing positions as one possible, though likely unpopular, solution to weekend margin risk. 
  • Afolayan (Cargill) said he was not certain where 24/7 perpetual futures would add value and that they might be creating new disruptions to the existing, well-established physical commodity futures market. 
  • Barker (NCFC) said for single-harvest commodities, the economic signals from carry and inverted markets are central to managing the supply chain across a season.  He questioned how a funding-rate structure would replicate that seasonality signal. 
  • Neale (FIA) said agriculture may have a stronger connection between physical players and traditional futures market structure than any other commodity sector, pointing to commercial elevators’ short positions, which are set and then rolled once product is sold. He raised concern that liquidity drawn into a perpetual contract could leave commercial hedgers with less liquidity in further-out traditional contracts. 
  • Strubhar (Grain and Feed Association of Illinois) said technology can help manage risk for 24-hour trading, but that seven-day trading creates a problem given an extra two days of margin exposure since government banks cannot be accessed over weekends.  He called auto-liquidation in lieu of margining a real challenge from a hedging perspective, warning about the unintended consequence of liquidity being pulled out of traditional ag futures markets. 
  • Prosser (AAC Chair, Scoular) said Scoular will not have much interest in 24/7 trading or perpetuals in agriculture, highlighting that what concerns him is how the industry is going to keep perpetuals out of agricultural markets. 
  • Sammann (CME Group) said risk management and auto-liquidation are issues, but that the auto-deleveraging feature is more concerning, particularly for the physical ag market.  He distinguished a perpetual, a “floating spot market” reflecting the instantaneous price, from a traditional future, which conveys forward curve information crucial for hedging decisions. 
  • Wheeler (USA Rice Federation) said that when rice moved to overnight trading, the industry was hunting for liquidity and certain farmers were hurt, and that trading hours were subsequently adjusted.  He warned that a blanket policy on 24/7 trading could be bad for smaller and newer markets within agriculture. 
  • Donovan (Bunge) said past expansions of trading hours did not increase liquidity or volume, and often just spread existing volume over a longer time frame. 
  • Allen (ACSA) said cotton is not fungible the way corn and soybeans are given granular quality specifications, credited the ICE #2 contract’s physical delivery structure with underpinning the global competitiveness of the U.S. cotton industry, and expressed concern about outside, non-agricultural market influence spilling into and affecting convergence and liquidity in ag markets. 
  • Ongstad (MIAX) said his customers have little interest in 24/7 trading, and asked Smith whether he sees any liquidity issues with perpetual futures versus spot markets.  Smith responded that in Bitcoin cash markets today, the perpetual futures market is now larger in magnitude than the underlying cash market, but that the derivative still points back to the cash market. 
  • Chairman Selig emphasized that preserving liquidity, price discovery, and the competitiveness of U.S. agricultural markets will remain central considerations as the Commission evaluates emerging products.  He clarified that while standard margin-based liquidation is part of the currently approved product, the CFTC has not approved any auto-deleveraging mechanism for any U.S. product.  
  • Chairman Selig reiterated that the CFTC will not take a one-size-fits-all approach to new, novel products, and that each novel instrument needs to be evaluated on its own and separated from red herrings occurring offshore. He emphasized that agricultural markets should not be required to adopt changes simply because they exist elsewhere. 

CLOSING REMARKS 

Michael Selig, Chairman, Commodity Futures Trading Commission 

  • Highlighted how this is a consequential period for U.S. derivatives markets and stressed the importance of not pushing innovation offshore, citing the history of the agricultural options ban and its reversal. 
  • Stated that novel products are not suitable for every asset class, but pushing certain instruments offshore is not the correct route to take.  He said that expertise from the AAC and Ag Committee legislators will help the CFTC get the regulations right.