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NCBA Asks Changes in Feeder Contract

NCBA Asks Changes in Feeder Contract
Current market realities are beef goes into feedlots much heavier than CME contract weight range.

The National Cattlemen's Beef Association (NCBA) is requesting a change in the Chicago Mercantile Exchange (CME) feeder cattle contract.

NCBA issued a letter to the CME's Commodity Research and Product Development Department supporting the removal of the 650-699 pound category from the calculation of the CME Feeder Cattle Futures Index.

NCBA President Bill Donald says inclusion of an 850-899 pound feeder cattle category makes sense given the current reality of the marketplace.

NCBA says the change would improve the capability of the CME feeder cattle futures contract as a risk management tool relating to cattle placements in feedlots.

"With record grain prices, more cattle are remaining on forage for as long as possible before going to the feedlot," Donald says. "The realities of the marketplace vary year to year and as a producer, I respond to those changes.

"The intent is to adjust the index in order to more accurately reflect the realities of the marketplace. We need the CME Feeder Cattle Futures Index to adjust, as well, in order to serve as a viable risk management tool."

A CME representative says such adjustments to the index are not unprecedented. The cash-settled contract has had various changes in weight ranges in the last 25 years, including the following: 600-800 pounds from 1986-1992; 700-799 pounds from 1993-1999; 700-849 pounds from 2000-2005; and 650-849 pounds since June 2005.

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