CME's Changes to Futures Contracts Show Promising Progress in Effort to Reduce Market VolatilityMon, 09 Apr 2018 11:34:04 CDT
In 2016, the CME Group founded a working group with the National Cattlemen’s Beef Association and other organizations in the livestock industry to address cattle market volatility for several years. CME Group Managing Director of Agricultural Products, Tim Andriesen provided an update recently on the Exchange’s progress. Over the past couple years, Andriesen says the working group has focused on refining futures contracts and developing better ways to support the risk management needs of the beef producer.
“Out of that, we’ve made a number of changes to the live cattle futures contract, designed to do two things,” he said. “First, enhance our markets and second, ensure they more accurately reflect the cash market values.”
In doing this, Andriesen says changes made have included the implementation of a messaging efficiency program, reducing livestock trading hours, modifying delivery rules to allow for a greater capacity and revising quality and grading specs. As a result, he says CME’s contracts are now more effective as a hedging tool for the cattle industry and believes delivery capacity has indeed improved. With the addition of four new delivery locations, capacity has grown by six percent from last year. The purpose of these changes are built on the intention that they will help reduce the chance of congestion that could adversely affect price discovery - the goal being to align futures with cash market values. So far, improvements seem to be happening and industry feedback has been good, but Andriesen says the process is ongoing and that CME will continue to work with the industry to make their markets work for producers.
“We value our relationship with the industry,” he said, “and we’ll continue to seek their feedback and engagement in our markets as we look at potential changes.”
Listen to Andriesen talking about the CME Group's efforts to improve the futures trade for live and feeder cattle markets, with Radio Oklahoma Ag Network Farm Director Ron Hays, on today's Beef Buzz.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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