Key Takeaways
- • CFTC Chairman Michael Selig told the agricultural futures conference (AgCon, co-hosted by Kansas State University in Manhattan, Kan.) that agriculture "won't be dragged into a 24/7 model simply because the technology exists," and said ag commodities may not fit perpetual contracts well.
- • The CFTC is exploring crypto- and prediction-market-inspired trading concepts, including perpetual futures with no expiration date and round-the-clock trading, for farm futures markets.
- • Cargill's Gabe Afolayan argued that "price discovery and risk management are the whole point of a futures market," and warned that weekend trading could thin liquidity and that farmers need delivery-month contracts for planting decisions.
- • Afolayan suggested perpetual contracts could suit inputs such as fertilizer and diesel, a narrower acceptance than the crypto-style model as proposed.
- • Rabobank's Lance Zimmerman said cattle market volatility is now triple its pre-pandemic level, straining feeders' operating lines through frequent margin calls.
Summary
The Commodity Futures Trading Commission used its agricultural futures conference, AgCon, to test new trading concepts for farm commodity markets. The event, co-hosted by Kansas State University in Manhattan, Kan., brought together regulators, grain merchandisers and livestock hedgers to discuss what risk management tools could look like in the years ahead, according to the original report by Farm Progress.
The CFTC is weighing product designs borrowed from cryptocurrency and prediction markets, including perpetual futures contracts that carry no expiration date and trading that runs around the clock. The proposals arrive against a futures system that American farmers have relied on for more than 175 years, dating to the founding of the Chicago Board of Trade in 1848.
CFTC Chairman Michael Selig pushed back on the idea that agriculture should follow a continuous trading model simply because the technology allows it. He told the conference that agriculture "won't be dragged into a 24/7 model simply because the technology exists," and said ag commodities may not fit perpetual contracts well.
Grain and livestock hedgers voiced concerns. Gabe Afolayan, vice president of soybean merchandising at Cargill, said "price discovery and risk management are the whole point of a futures market." He noted that farmers depend on contracts tied to specific delivery months to plan planting, and warned that weekend trading could thin market liquidity. He did suggest perpetual contracts might work for inputs such as fertilizer and diesel.
Livestock risk was also raised. Lance Zimmerman of Rabobank said today's cattle market volatility is triple its level before the pandemic, a condition that strains feeders' operating lines through frequent margin calls.
The CFTC is weighing product designs borrowed from cryptocurrency and prediction markets, including perpetual futures contracts that carry no expiration date and trading that runs around the clock. The proposals arrive against a futures system that American farmers have relied on for more than 175 years, dating to the founding of the Chicago Board of Trade in 1848.
CFTC Chairman Michael Selig pushed back on the idea that agriculture should follow a continuous trading model simply because the technology allows it. He told the conference that agriculture "won't be dragged into a 24/7 model simply because the technology exists," and said ag commodities may not fit perpetual contracts well.
Grain and livestock hedgers voiced concerns. Gabe Afolayan, vice president of soybean merchandising at Cargill, said "price discovery and risk management are the whole point of a futures market." He noted that farmers depend on contracts tied to specific delivery months to plan planting, and warned that weekend trading could thin market liquidity. He did suggest perpetual contracts might work for inputs such as fertilizer and diesel.
Livestock risk was also raised. Lance Zimmerman of Rabobank said today's cattle market volatility is triple its level before the pandemic, a condition that strains feeders' operating lines through frequent margin calls.
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