In a letter dated Sept. 10, but announced Sept. 14, R-CALF requested the Commodity Futures Trading Commission (CFTC) to investigate a series of what it called “anomalous downturns” in the live cattle futures market beginning in 2013.
The group specifically asked the CFTC to “investigate packer-related or packer-directed trading activities” that it claims financially harmed ranchers. The group drew attention to the differences in live cattle prices on the futures board, the 5-area daily weighted average direct steer slaughter prices, the cutout prices, and the implied packer margins (difference between cutouts and slaughter prices) from 2013 through mid-August 2018.
The group especially draws attention to several “anomalous downturns” in each of the covered years. Among these highlighted downturns were the regular seasonal decline in the futures that occurs after the April contract expires and leaves June as the front month on the board. For example, the difference between the April 2019 contract and the June 2019 contract as of press was just over $7. This seasonal decline also regularly corresponds with the seasonal increase in the cutouts that happens regularly at the beginning of summer.
R-CALF asks the CFTC to take specific investigatory action on these and other downturns. “While we are convinced the packers are engaged in conduct to manipulate the market, we are continuing our search for how they have succeeded in capturing larger margins while cattle producers receive depressed prices,” the letter read.
“We suspect that all or some of these breaks were effected by a person or persons representing the financial interests of the oligopolistic packers.”
