There’s been a ‘burr under the saddle’ of many cattlemen in the Northern Plains since word came out earlier this month from the Chicago Mercantile Exchange – saying that producers will begin paying a ‘seasonal discount’ on live cattle that are delivered to the Worthing, South Dakota sales barn against the October 2017 futures contract.
The CME announced August 5th that a $1.50 per hundredweight discount would begin with trade starting next Monday, August 22nd. The move is widely opposed by cattle producers.
During a ‘Capitol Hill Update’ from South Dakota’s Congressional delegation at Dakotafest in Mitchell, on Wednesday, an audience member asked Republican Senators Mike Rounds and John Thune, and Republican Representative Kristi Noem what they might be able to do about the issue.
The CME said the new measures are based on “continued collaboration with and feedback from the cattle industry as well as the results from an independent study conducted by Informa Economics.”
The CME said – based on extensive customer feedback, internal review and Informa’s independent research, CME Group will add a seasonal discount of $1.50 per hundredweight on live cattle tendered to its Worthing, South Dakota delivery location for the October contract only. The new discount will be effective with the October 2017 contract, which will be listed for trading on Monday, August 22, 2016, pending CFTC review. The extensive research supporting this decision concluded that this discount would better align delivery values with cash market prices and maintain compliance with CFTC’s policy on location price differentials, while resulting in little or no impact on local cash cattle prices. The full Informa Economics report, Regional Cattle Price Differences and Their Impact on CME Live Cattle Delivery Points, is available at www.cmegroup.com/livestockupdates.