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Hearing witnesses discuss cattle futures volatility

Concerns over extreme volatility in the cattle futures markets were discussed at a Senate Agriculture Committee hearing in Washington.

Montana rancher, cattle feeder and auctioneer Joe Goggins, testifying on behalf of the U.S. Cattlemen’s Association, said the futures market volatility is deterring cattlemen from using the markets because of the risk of losing capital.

“These massive, violent moves on the futures board cause people to pay huge margins calls, which drains their available cash, forcing them to get out of the hedge at a very unfavorable position,” Goggins said. “In our own family feeding operation, we currently background and feed near 50-thousand head of calves per year. The futures board is no longer a viable tool for us due to the volatility of the market and the amount of money it takes to hold a position. This may allow us only to feed half as many cattle going forward.”

Goggins requested that the Senate Ag Committee to work with the Commodity Futures Trading Commission to ensure that disruptive trading practices are prohibited.

But Tracy Brunner, Kansas cattleman and president of the National Cattlemen’s Beef Association, said they don’t want the government to get involved.

“We have a joint NCBA-CME working group which is analyzing potential changes, such as slowing down the market to help ensure a level playing field for producers who are using these tools to manage their price risks,” Bruner said. “Today we ask for no direct action from our government in our cattle marketing systems and forums.”

AUDIO: Excerpts from Goggins’ testimony

AUDIO: Excerpts from Brunner’s testimony