## Facts

- Ag Processing Inc. a cooperative (AGP) is a cooperatively owned agribusiness primarily engaged in soybean processing, including producing soybean meal and crude soybean oil.
- As part of its commercial risk management as a soybean crusher, AGP took positions in Chicago Board of Trade (CBOT) soybean meal futures.
- CFTC Regulation 150.2 set federal speculative position limits for certain agricultural futures contracts, including CBOT soybean meal, with separate limits for (a) spot month (the contract month nearest to expiration) and (b) all-months combined (the sum of positions across all contract months).
- Positions qualifying as bona fide hedges could be exempt from the federal limits, but the market participant had to obtain authorization from the CFTC and disclose relevant information to the CFTC (including through Form 204 reporting).
- During a relevant period from in or about December 2017 through at least July 2019, AGP held all-months combined soybean meal futures positions that exceeded the federal all-months position limit in Regulation 150.2.
- At various times in that period, AGP exceeded the all-months limit by between 63 and 1,357 futures contracts.
- AGP applied for and received exemptions from the designated contract market (CME/CBOT) that permitted AGP to exceed the exchange’s position limits under exchange rules (including CBOT Rule 559).
- Despite exchange-level exemptions (and related reporting), AGP did not seek or obtain authorization from the CFTC to exceed the federal position limits during the relevant period.
- The CFTC instituted administrative proceedings under Commodity Exchange Act (CEA) § 6(c) and (d) and stated it had reason to believe AGP’s conduct violated CEA § 4a(b)(2) and CFTC Regulation 150.2.
- AGP submitted an Offer of Settlement that the CFTC accepted; AGP consented to entry of the order without admitting or denying the findings or conclusions.
- The CFTC noted AGP’s cooperation and that AGP later obtained authorization for future hedging exemptions.

## Issues

1. Did AGP violate CEA § 4a(b)(2) and CFTC Regulation 150.2 by holding CBOT soybean meal futures positions that exceeded the federal all-months speculative position limit without CFTC authorization for a bona fide hedging exemption?

## Decision

- The CFTC accepted AGP’s Offer of Settlement and entered a settled administrative enforcement order (Jan. 28, 2021).
- The CFTC found that, on multiple occasions during the relevant period, AGP exceeded the all-months speculative position limit for CBOT soybean meal futures set by Regulation 150.2.
- The CFTC concluded AGP’s excess positions violated CEA § 4a(b)(2) and CFTC Regulation 150.2 because AGP lacked CFTC authorization to exceed federal limits.
- The CFTC ordered AGP to cease and desist from further violations of CEA § 4a(b)(2) and Regulation 150.2.
- The CFTC imposed a $400,000 civil monetary penalty.
- The order reflected that AGP cooperated with the investigation and later obtained authorization for future hedging exemptions.

## Legal Principles

- Federal speculative position limits set by the CEA and CFTC regulations apply even when a designated contract market grants an exchange-level position-limit exemption.
- A commercial purpose or hedge rationale does not, by itself, exempt a trader from federal position limits; an exemption from federal limits requires CFTC authorization and required disclosures (including Form 204 reporting where applicable).
- Exceeding the federal all-months combined limit for a covered agricultural futures contract can violate CEA § 4a(b)(2) and CFTC Regulation 150.2, even if the trader stays within exchange-granted limits.

## Conclusion

In this settled CFTC administrative proceeding, the Commission found AGP exceeded the federal all-months speculative position limit for CBOT soybean meal futures multiple times from December 2017 through at least July 2019 and did so without CFTC authorization for a bona fide hedging exemption. Although AGP obtained exchange-level exemptions, the CFTC concluded those did not permit exceeding federal limits, and it imposed a cease-and-desist order and a $400,000 civil monetary penalty.


In re Ag Processing Inc. A Cooperative, CFTC Docket No. 21-02 (2021)