The United States Cattlemen’s Association (USCA) issued the following statement on the announcement made by the CME Group this week that a proposal is being considered to switch to a cash settlement process for its live futures. The CME Group also announced that modifications to the physical delivery process would be considered.
USCA Marketing Committee Chair Allan Sents commented, “The need to evaluate the current state of the livestock marketplace is real; however, the changes proposed by the CME Group, as announced this week, will not address the concerns of producers across the country. Rather, the proposal to switch to a cash settlement is a step in the wrong direction. Price discovery achieved from actively traded futures contracts with multiple buyers and sellers far outweighs an increasingly thinner traded cash market.”
“The proposed changes will do nothing to impact the amount of high frequency, overly speculative trading, which is one of the real issues that must be addressed if we are to achieve market stability. Efforts must instead be made toward encouraging “long” participation and addressing the many issues currently within the futures market, not the settlement process.”
Sents concluded, “The CME Group, industry stakeholders, and producers across the country must acknowledge the significant issues within today’s livestock market. Until a hard review and assessment of these issues is taken, our country’s producers will continue to feel the consequences on their bottom line.”