News

CME changes concern Iowa cattlemen

The Iowa Cattlemen’s Association (ICA) is concerned with changes the CME Group is making to cattle futures contracts.

One of those changes is the addition of a seasonal discount of $1.50 per hundredweight on cattle delivered to the Worthing, South Dakota delivery point. The discount will be effective with the October 2017 contract, which will be listed on August 22nd.

ICA CEO Matt Deppe says the move goes against industry wishes and creates a “marketing disadvantage” for Iowa cattle feeders.

“Especially our northwest Iowa feeders who utilize the Worthing delivery point as a marketing tool, as well as the cattle futures contract,” Deppe says. “Frankly, this decision feels like a mandate to our folks on how and when they can and should feed cattle for market.”

The move may also decrease cash negotiated trade in the upper Midwest, Deppe says.

“There could be high likelihood that feeders in not only northwest Iowa, but also northeast Nebraska, don’t utilize that contract, which would limit the volume,” he says, “and we all know that the most deliveries, in terms of a percentage of deliveries, take place in Worthing as an individual point.”

In a news release, CME said the discount will better align delivery values with cash market prices and result in little or no impact on local cash cattle prices.

CME also expressed concern about a lack of negotiated trade across the country and said it will consider moving to a cash settled contract if price discovery and transparency do not increase.

AUDIO: Matt Deppe