Cutting the Congressional Commodity Crisis

On July 21, 2010, President Obama signed into law the Dodd-Frank Act. The bill, proposed by Congressman Barney Frank and Senator Chris Dodd, and so named, came as a result of the 2008 financial meltdown and seeks to implement new regulatory reforms to the financial services industry, aka- Wall Street. Reform in this case has meant greater transparency in the markets, tougher standards on fraud manipulation, more authority over insider trading, and greater protection for whistle blowers. Overall, the question became: what is sufficient manipulation/regulation to ensure sound pricing without the cost outweighing the benefits? Sounds pretty straightforward right? Well…not so much. Though unlikely to receive funding due to increasing budget cuts, the Act would have had numerous effects on agriculture.

Primarily, the Act could affect agriculture by addressing “commodity swaps” and giving a precise definition of a “commodity.” Commodity swaps are typically used as a hedging device to protect one’s self against the rising or falling price of a commodity. For example, say a company buys a lot of oil. This company can buy a contract, or pay a premium, for the legal right to purchase oil at a fixed price for a certain amount of time. This could potentially save them millions in the long run, making the premium paid for those contracts seem like nothing. Dodd-Frank has repealed all exemptions granted to security-based swaps. Though the exact terms aren’t yet clear, Title VII states; “Except as provided otherwise, no Federal assistance may be provided to any swaps entity with respect to any swap, security-based swap, or other activity of the swaps entity" (Thomas).

This mandate could affect farming cooperatives if the Commodity Futures Trading Commission (CFTC) decides to define them as swap dealers rather than farm cooperatives and thus subjecting them to the regulations and capital requirements imposed on swap dealers. This could have dramatic impacts on people such as dairy farmers by hindering their ability to manage the risk of falling milk prices and rising production costs, a risk that could usually be transferred to a swap dealer through a commodity swap. A solution to this problem would be to term cooperatives, such as Dairy Farmers of America, as end-users rather than swap dealers, and exempting agricultural cooperatives altogether. Clearly, definitions become incredibly important at this point, and are primarily left to the discretion of the CFTC. Before this Act, “commodities” wasn’t so much a noun as it was a reference to a group of investment securities; some popular ones being oil, coffee, corn, cotton, and pork bellies. Without a precise definition, it will be much harder to know who to exempt and who to impose regulations on. Consequently, without exemption, growers will have to assume the financial risk associated with commodity price fluctuations, leaving America’s farmers incredibly vulnerable.

Having a degree in finance, I was eager to right this blog, and found it fairly easy to do so. However, what I could never have comprehended a year ago is the far reaching impact imposed legislation could have on the different sectors of America. In this instance, a bill directed at keeping Wall Street honest could have come back to wreak havoc on America’s farmers and agricultural communities. Let's hope that the current budget cuts end up eliminating funding for the Dodd-Frank Act, otherwise we could find ourselves paying more for a gallon of milk than a barrel of oil.

-Grace Boatright
National Grange Program Assistant

http://www.http//thomas.loc.gov/cgi-bin/bdquery/z?d111:H.R.4173

Celebrating Women’s History Month

Since the Grange began, it has strived to support equality for women within the Grange and in their communities. The Grange let it be known how important women were to the agricultural community by declaring that no Grange could be formed without at least four women. Four officer’s positions could and still can only be held by women, giving women an equal vote in the organization. March is Women’s History Month and we as Grangers should be celebrating our proud history and Grange women of past and present. Caroline Hall, Temperance Kelley, Eva McDowell, Jennie Buell, Jeanne C. Carr, Eliza Gifford, Sarah G. Baird, Mary Mayo, and Eleanor Roosevelt are some names you will easily recognize. All of these women have affected the Grange and the world. Which of these women do you know? Caroline Hall, the Grange’s eighth founder, contributed money, compiled one of the first Grange songbooks, handled the organizational work, and served as the first Ceres, created for women only. Temperance Kelley, who gave her husband, Oliver Kelley, enough money to continue with organizing the Grange, encouraged his dream of creating a fraternal organization for farmers. Eva McDowell served as Treasurer of the National Grange for twenty-six years. Maybe the name that stands out to you most is Sarah G. Baird, the first woman to be a State Master. She became State Master of Minnesota in 1895 and would stay in that position for seventeen years. Eliza Gifford and Jennie Buell were outspoken Grangers who fought for women’s suffrage with Susan B. Anthony, leader of NAWSA (National American Woman Suffrage Association) and campaigned with Frances Willard, the leader of the WCTU (Woman’s Christian Temperance Union), in support of temperance legislation. Jeanne C. Carr helped to found the California State Grange, was one of the first women to run for Lecturer of the California State Grange, and campaigned to keep women’s suffrage an issue in California and the State Grange behind the issue. Mary Mayo wrote for the Michigan Grange newspaper, spoke publicly on behalf of the Grange, helped recruit members, strength the order, and served as the chair for the Michigan State Grange Women’s Committee for fourteen years. And last but not least, Eleanor Roosevelt; First Lady of the United States was a Grange member for over 25 years. This is just a small part of women’s history within the Grange. Learn more about these women and others and honor them not only during Women’s History Month but throughout the whole year.

Samantha Johnson
-Sales, Benefits,& Programs Director