Agricultural Commodities Definition Regulation

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Admis logo.png
Gavel.png FINAL RULE: The CFTC issued its final rule on the definition of agricultural commodities at its July 7, 2011 open meeting.
Dodd-Frank Timeline, Agricultural Commodities Definition
Proposal Date Final Rule Effective/Compliance Date
October 26,2010 July 13, 2011, September 12, 2011
Dodd-Frank Timeline, Agricultural Swaps
Final Rule Issue Effective Date No-action Deadline
August 10, 2011 December 31, 2011 December 31, 2012
Dodd-Frank Timeline, Commodity Options and Agricultural Swaps
Final Rule-Swaps Effective Date - Swaps Effective Date-Options
August 10, 2011 December 31, 2011 June 26, 2012

On July 7, 2011, the CFTC held an open meeting to discuss five final rulemakings under the Dodd-Frank Act. Among the rules approved at the meeting was a final rule regarding the definition of agricultural commodities.[1]

The final rule is divided into the following four categories:

  1. "Enumerated commodities" (those listed in section 1a of the Commodity Exchange Act, for example, wheat, corn, the "soy complex," livestock, cotton, coffee, etc;
  2. A general definition that includes "All other commodities that are, or once were, or are derived from, living organisms, including plant, animal and aquatic life, which are generally fungible, within their respective classes, and are used primarily for human food, shelter, animal feed, or natural fiber;"
  3. Products that are "agricultural in nature," but do not fit within Category 2 above, such as tobacco, horticulture, and other such commodities that the Commission may designate; and
  4. A provision applicable to: “Commodity-based indexes based wholly or principally on underlying agricultural commodities” - any index that is made up of more than 50 per cent of agricultural commodities.[2]

Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) necessitates a formal definition of Agricultural Commodities for, among other things, new rules on position limits and in the trading of agricultural swaps. Prior to Dodd-Frank, neither the U.S. Congress nor the Commodity Futures Trading Commission (CFTC) had ever officially defined the term "Agricultural Commodity". At the CFTC Open Meeting, October 19, 2010 (the Second Series of Proposed Rules under the Dodd-Frank Act), the commission addressed Agricultural Swaps Regulation. In order to effectively address the issue, however, certain definitions needed to be established. Thus, the commission approved an advance notice of proposed rulemaking (ANPRM) regarding the definition of agricultural commodities.

An advance notice of proposed rulemaking (ANPRM) regarding agricultural swaps was also approved at the October 19, 2010 meeting. See Agricultural Swaps Regulation - ANPRM for documents related to this notice.

Related Documents: Fact Sheet, Q&A, and Final Rule as it Appeared in the Federal Register, July 13, 2011


References

  1. Open Meeting on Five Final Rule Proposals under the Dodd-Frank Act. CFTC. Retrieved on July 7, 2011.
  2. Final Rule Regarding the Definition of Agricultural Commodity. CFTC. Retrieved on July 7, 2011.

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