By Suzanne Cosgrove
Speaking at the CFTC’s first Agricultural Advisory Committee (AAC) meeting of the year on Wednesday, Chairman Rostin Behnam focused on sustainability markets, including carbon credits and biofuels. Regulators need to work to ensure there is a level playing field as discussions around carbon credits intensify, he told the group. “On the sustainability and revenue side,” there is real opportunity for ag producers, Behnam said.
“I am very intrigued by the discussion around sustainable biofuels production,” said Commissioner Summer Mersinger, in remarks made at the start of the AAC’s meeting. “I have watched firsthand how the growth in the biofuels industry has changed the trajectory of production agriculture in my home state of South Dakota.”
Citing the example of a dry mill biofuels plant in Onida, South Dakota, which began production in 2019, Mersinger said the South Dakota plant anticipates using 25 bushels of corn a year to produce 70 million gallons of ethanol. In addition to the biofuel production, this mill also is set to produce 12.5 million pounds of corn oil, she said. “Projects like the new ethanol plant are vital to the long-term survival of the rural economy.”
But sustainable biofuels markets are still in their development phase–one meeting participant representing U.S corn growers asked the Commission to help make public the price discovery process that surrounds “assets” in the carbon credit markets, possibly requiring standardization. Currently, there is a confusing myriad of programs, credits, and offsets, he said.
Geopolitical considerations. Beyond biofuels, Commissioner Christy Goldsmith Romero noted legacy agricultural markets have weathered pandemic-related supply chain disruptions, labor and transportation shortages, and Russia’s war on Ukraine that impacted energy and food prices and market volatility in recent years.
“International shipping is a challenge that I have heard from several groups,” Goldsmith Romero said. “When I toured Michigan’s largest grain handler, Michigan Agricultural Commodities Inc., I met with two twin brothers who took over the business from their father. They ship soybeans to Asian countries for tofu and other food products. They told me about the problems and uncertainties they have faced trying to ship soybeans internationally given the shortage of ships and unreliable schedules,” she added.
“Uncertainty about the availability of the Black Sea Corridor and access to China during Covid lockdowns, concerns about ship queues, congestion, and unpredictable shipping schedules and services have had very real impacts,” Goldsmith Romero said. “It’s one thing to read about international shipping issues. It’s another to be standing in a grain handler’s loading dock looking at the food they need to ship as soon as possible.”
Intermodal traffic. Separately, Federal Maritime Commission Chairman Daniel Maffei said he was aware of the complexity facing producers given multiple carriers and multiple shipping schedules and deadlines. “The main thing is transparency,” communicating with all parties involved, Maffei said. He added the agency has stepped up its enforcement and compliance efforts.
However, although the White House estimated last year that the container shipping industry made a record $190 billion in profits in 2021, a seven-fold increase from the previous year, ocean shipping is primarily a deregulated field, Maffei said.
If you can’t navigate interior waterways like the Mississippi River, it will impact ocean shipping and ports, he added. “Do we (the FMC) have enough authority? I don’t know yet,” he said, observing that Congress may need to implement more legislation to resolve current intermodal shipping.
China remains key partner. Maffei said he was “very cognizant” of the broader issues involving China, alluding to the strained trade relationship between the two countries. “It’s not that they are totally unresponsive,” he said. “We subject Chinese maritime carriers to the same rules as other maritime carriers,” he added.
“We can’t give up on China,” Maffei said. “It’s a very big and complex country. There is so much demand there for our agriculture goods,” he noted. “We both (U.S. and China) have an interest in getting more of our agricultural exports into China.”
CFTC’s next steps. “Our role at the CFTC is to ensure that market participants can confidently use futures, options, and swaps to hedge their risks and navigate the complexities of the global agricultural economy,” said Commissioner Caroline Pham.
Specifically, the Commission and derivatives “certainly have a role to play” in the price discovery mechanisms and data accessibility for biofuels, one AAC conference participant said. The group’s next meeting is scheduled to take place in July.