The Chicago Mercantile Group, Inc. (CME) announced planned changes to live and feeder cattle contracts pending approval from the Commodity Futures Trading Commission (CFTC).
The changes proposed by CME will take effect on Oct. 5, 2020. Among the changes proposed are to amend the daily price limits to adjust the current, initial daily price limit for live cattle futures from $0.03 to $0.040 per pound and for feeder cattle futures from $0.045 to $0.05 per pound.
The CME Group will maintain the existing practice of establishing expanded price limit levels at 150 percent of initial price limit levels, which will result in an increase in the expanded price limit for live cattle from $0.045 to $0.06 per pound and an increase in the expanded price limit for feeder cattle from $0.0675 to $0.075 per pound.
The current fixed daily price limit regimes, consisting of a fixed price limit and expansion mechanism, would be replaced with a variable price limit regime that will be price-based and reset annually. It will set the price limit levels for the feeder cattle futures contract at a ratio of 1.25 times the live cattle futures contract price limit levels.
“The CME knows our position on this. We’ve tried to make it clear increasing those limits may be advantageous to the CME from their collateral position, but it certainly isn’t advantageous to the cow-calf producer or the feedlot operator out there right now,” said National Cattlemen’s Beef Association Policy Division Chairman Todd Wilkinson to WNAX radio.
“This was all there originally for producers trying to be able to hedge their product and take some risk off the table. Now it seems like the CME is more focused on day-traders and people that aren’t directly impacted but own one of those products meaning the feeder cattle contracts or live cattle contracts.” — Charles Wallace, WLJ editor
