CME Group officials last week indicated the group is considering switching to a cash settlement process for its live cattle futures. Traders continue to complain to CME regarding the extreme volatility in the live cattle futures, and are looking to CME group to bring some control back to the market. Sharp declines in price last fall led to the scrutiny. If implemented, the change would be a major attempt to restore confidence in the market by adjusting the way it operates. CME’s Dave Lehman says discussions about the new settlement procedure were part of an all-encompassing review of the market by CME. He told Reuters “it’s on the table,” adding that CME was also looking at potential modifications to the physical delivery process. Feeder cattle and lean hog futures are already cash-settled, leaving live cattle as the remaining physical delivery settled market. Lehman says volatility is getting worse and farmers have been selling cattle to packer’s months in advance, rather than negotiating shortly before slaughter. Producers say that has led to questionable pricing systems and price discovery for the market.
From the National Association of Farm Broadcasting news service.