CFTC Re-proposes Position Limits and Finalizes Aggregation Rule

The Commodity Futures Trading Commission (CFTC or Commission) voted unanimously to approve the Position Limits for Derivatives re-proposal, as well as the Aggregation of Positions final rule. The position limits re-proposal comes in response to comment received from the December 2013 proposal and the June 2016 supplemental proposal.

Chairman Massad provided two reasons for issuing a re-proposal: 1) the public will benefit from seeing the proposal in its entirety to better understand how the various changes work together; and 2) the Commission is in a time of transition and the uncertainty and inconsistency from one year to the next are not helpful to market participants.  He also recognized the fact that there will still be those that are critical of the proposal, but that it is important for the Commission to implement a balanced rule that achieves Congressional objectives.

Commissioner Giancarlo indicated that he “feel[s] comfortable that the proposal before us provides the basis for the implementation of a final position limits rule that [he] could support.” He mentioned that while some of the concerns expressed by market participants regarding the 2011 final rule were addressed, other areas do not appear to have been as well addressed – and that, one more round of public comment is appropriate. Commissioner Bowen supported the re-proposal as it moves the Commission one step closer to the implementation of position limits as directed by Congress.

The comment period for the re-proposal will be open for 60 days after publication in the Federal Register.

Please contact the ACSA office to obtain copies.


American farmers could be one of the biggest losers if President-elect Donald Trump starts a trade war with China, a former chief economist for the Agriculture Department said today.

The United States currently exports about $20 billion to $24 billion worth of agricultural exports to China each year, and that’s expected to “grow even more over the next 10 years,” Joe Glauber, a visiting senior research fellow at the International Food Policy Research Institute, said at a discussion on U.S.-China farm trade hosted by the U.S. Chamber of Commerce. “That’s a pretty big vulnerability.”

Trump has threatened to use a variety of trade measures to defend the U.S. manufacturing sector and try to bring jobs back to the United States, raising the prospect of a tit-for-tat trade war with the world’s second largest economy.

In the short-term, it would be hard for China to replace all of the soybeans and other agricultural products it imports from the United States.

“But there are other sources,” Glauber said. “I think Brazil and Argentina and Ukraine and a number of other places would be more than happy to fill whatever needs they could, shipping soybeans to China. I think these things can be very devastating and let’s hope it doesn’t get to that point.”

The United States exported $10.5 billion in soybeans to China in 2015. That was more than half of the $20.3 billion in total U.S. farm exports to China.

Altogether, American farmers enjoyed a $16 billion farm trade surplus with China last year, with other major exports including sorghum ($2.1 billion), distiller’s dried grains with solubles ($1.6 billion), cotton ($860 million), forage products ($359 million), dairy products ($350 million), pork ($319 million), as well as wheat, corn, poultry and additional farm goods.

House Ag Committee Chairman Conaway urges CFTC to Halt Midnight Rulemaking

Today, House Agriculture Committee Chairman K. Michael Conaway sent a letter to U.S. Commodity Futures Trading Commission (CFTC) Chairman Timothy Massad requesting he not move forward on any controversial regulations during the final months of President Obama’s administration.  

In the letter, he asked Massad to refrain from “pushing through controversial regulations,”; adding, “While we may not agree on which regulations are overreaching or unnecessary, we should agree that the American people have asked for someone else to make that judgement.”

“President Obama told the public that he was looking forward to doing everything he could to make sure the next administration is successful. That must include preserving difficult and controversial rulemakings for the next Chairman of the CFTC to complete. Failing to extend this courtesy to your successor likely will not settle the underlying policy questions. Instead, it will serve only to create needless compliance burdens for market intermediaries and sow confusion for end-users who depend on derivatives to manage their business risks,” Conaway wrote.

Conaway specifically requested the commission not move forward on the controversial position limits rule making and to extend the comment period for Regulation Automated Trader (Reg AT), noting that further work and consideration is needed for each proposal.

Chairman Conaway concluded by thanking Chairman Massad for his service, writing, “Your forthright nature and willingness to listen served the Commission and our country well. Your leadership stabilized an agency reeling from previous mismanagement and your personal engagement provided a needed opportunity for end-users to be heard in the rulemaking process.”

Please click on the letter attached below.


China Cotton Market Report-July 2016

In June, China imported 332,884 bales (72,477 MT) of cotton, a decrease of 7.36 percent month-on-month (m/m), and a decrease of 55.2 percent year-on-year (y/y). The total value of cotton imports in June was USD 123.47 million, a decrease of 3.92 percent m/m and a decrease of 57.70 percent y/y. The U.S. was ranked as the largest cotton supplier to China in June. Australia was ranked as the second, Indian was ranked as the third.


From January to June, 2016, Chinese cotton imports totaled 1,975,755 bales (430,170 MT), a decline of 53.94 percent y/y.  U.S. cotton was ranked as the largest with a total quantity of 841,864 bales (117,977 MT), accounting for 27.43 percent of total imports. Uzbekistan was ranked as the second supplier with a total quantity of 397,209 bales (86,482 MT), accounting for 20.1 percent of total imports. India was ranked as the fourth with a total quantity of 243,115 bales (52,932 MT), accounting for 12.3 percent of total imports.


Please click on the link below to view the complete report.


2016-July-26-Cotton Market Report July 2016

China Cotton Market Report-March 2016


MONDAY 2016-MAR 28:


The U.S. was ranked as the second largest cotton supplier to China in February. By the end of February, Chinese cotton imports totaled 151,812 MT, a decline of 52.61 percent y/y.  U.S. cotton was ranked as the fourth with a total quantity of 22,073 MT, accounting for 14.54 percent of total imports.

According to the China Cotton Association (CCA)’s latest survey, the intended plantation acreage for 2016 increased slightly compared to the previous survey done by CCA of this type due to the second group of subsidies. In mid-March, the National Development and Reform Commission (NDRC) published the 2016 target price for Xinjiang cotton which is RMB 18,600 per MT, RMB 500 lower than in 2015.

During the CCA Cotton Situation Analysis Meeting in March, relevant government agencies expressed that the auction of reserved cotton will be conducted on a regular basis. The volume to be auctioned will be based on the market situation. The first auction this year will be scheduled in late April. Considering that enterprises need high quality cotton, the imported cotton in the reserve will be auctioned on the market in the first place.

For more details, please click on the link below to view the latest China Cotton Market Report.

2016-MAR-28 – ACSA Cotton Market Report March 2016

Conaway: Agriculture Secretary Can Relieve Crisis in Cotton Country

Conaway: Agriculture Secretary Can Relieve Crisis in Cotton Country


By Chairman K. Michael Conaway

Cotton farmers in America are facing a crisis. Extreme drought, predatory trade practices by countries like China and India, and the lack of a viable safety net are threatening the livelihoods of thousands of American farm families. While the general farm economy is experiencing the largest three-year percentage decline in net farm income since the Great Depression, a whopping 56 percent, the cotton industry is facing an existential threat.

It is against this backdrop that Secretary Vilsack wrote a column this week stating he does not have authority under the Farm Bill to declare cottonseed as an other oilseed. I submit there are a variety of reasons why that is simply not the case.

The Secretary argues that Congress removed cotton from Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) in the 2014 Farm Bill and, thus, his hands are tied. Here’s what Congress actually did in the 2014 Farm Bill: As a result of a WTO settlement with Brazil, Congress effectively removed cotton lint from ARC and PLC. Cottonseed has not historically been a covered commodity, and Congress never discussed adding cottonseed to the list of covered commodities. Rather, Congress left intact the Secretary’s authority to designate any oilseed as an “other oilseed.”

The Secretary has elsewhere argued that canons of statutory construction prevent him from acting. That is not the case. The statute in question plainly states that an “other oilseed” includes “any oilseed designated by the Secretary.” There is only one canon of statutory construction necessary to move forward with designating cottonseed as an “other oilseed”: the ordinary meaning of the statutory language. This is the canon the U.S. Supreme Court looks to before all others.

The Secretary has also argued he cannot designate cottonseed as an oilseed because the provision is reserved for “emerging oilseeds.” That is also not the case. The Farm Bill defines an oilseed as “a crop of sunflower seed, rapeseed, canola, safflower, flaxseed, mustard seed, crambe, sesame seed, or any other oilseed designated by the Secretary” (emphasis added). The Farm Bill does not restrict this authority to “emerging oilseeds.” The Secretary imposes this limitation on himself.

The Secretary further claims he cannot designate cottonseed as an oilseed because USDA already made a decision to make cottonseed eligible for STAX instead. While USDA may have accommodated the industry’s request, that does not change the fact that the law says nothing about cottonseed being eligible for STAX.

Finally, the Secretary has argued that Congress did not designate cottonseed as a covered commodity because of the cost of doing so. That is simply not correct. Congress never considered adding cottonseed as a covered commodity. That prospect arose long after passage of the 2014 Farm Bill and only after the predatory trade practices of China and India started decimating world cotton markets, rendering STAX ineffective.

To his credit, the Secretary is not without solutions to offer. However, there are real problems with the solutions the Secretary has laid out.

The first solution involves Congress lifting a prohibition on his ability to use what are called Section 32 funds in emergency situations like the one we are in today. I was neither active in removing this authority nor do I solely possess the ability to restore it. This requires an act of Congress, which takes time—something we are very short on if we are to provide timely help. This is also unnecessary in the current circumstances because, as I have pointed out in this reply, the Secretary already has all the authority he needs to act now.

The second solution regarding ginning cost share is temporary in nature and, I am afraid, much more a band-aid than a cure. While the Secretary has the authority to deliver that assistance now, it would not stop the bleeding and barely cover the wound.

I confess that all of the smoke and mirrors have been very frustrating to those of us who are deeply concerned about the crisis that is unfolding in farm country and for all of the livelihoods that are at stake. I am committed to standing up for America’s farm families. We would appreciate the Secretary fully leveraging the authorities currently available to him.

Payment Limit Update-Summary of Interim Reporting Solution

Below is an update from the Chairman of the NCC Payment Limit Technical Working Group on the Interim Reporting Process for the 2014 crop year.  While it’s a work in progress and not without challenges, FSA has reached a point where they are ready to begin attribution of benefits for this crop year.  As stated in the update, this is a recording and reporting solution only.  It does not establish policy.  That task is the responsibility of FSA Price Support. Raellen Erickson and her team at Price Support are currently working on those decisions and we expect to hear more from them in the near future about how they plan to resolve compliance/payment issues.

PLM Update 3-25-15

CMA-LSA-DMA Import Process1

A Look at China’s New Political and Economic Trends Under the New Normal

Here is our analysis report on this year’s ‘Two Sessions’ that finished on March 15th, 2015.  As we understand it, the outcomes of the ‘Two Sessions’  can be summarized in 3 points:

  1. The Chinese economy will continue to slow down under increased pressure from economic adjustment and proactive reform in 2015
  2. The economy isn’t declining across the board – some industries will benefit from the New Normal
  3. The Chinese government will continue to streamline administration and delegate powers to lower levels of government

Chinese traditional industries, particularly traditional manufacturing, will bear the brunt of the oncoming economic slowdown. The textile industry, as one of China’s typical traditional manufacturers will continue to face such challenges due to decreasing orders, increasing costs and declining profits.  The positive news is that both the Chinese government and textile industry are seeking to stem the economic downward trend.

We advise the US cotton industry to adapt to the New Normal and explore opportunities according to industrial, sectoral, and regional priorities which the Chinese government plans to support to elevate the demand of cotton in general.  China will continue to be an important marketplace for the growth of the US cotton industry.

For more details, please refer to the attached report.