CME Group Moves Again to Reduce Volatility in Livestock Futures

February 10, 2016 12:00 PM

Additional changes are being made to livestock futures markets in an effort to reduce the recent volatility that has raised so much concern among cattle ranchers.

The CME Group announced Wednesday that trading hours for livestock will be reduced, that a live cattle delivery point will be reviewed and that a joint working group is being formed with the National Cattlemen’s Beef Association (NCBA).

“Nothing is more important to us than the integrity of our markets, which help farmers and ranchers to discover prices and transfer risk,” says Tim Andriesen, managing director of agricultural products at the CME Group. “We believe these actions will further enhance our cattle markets for all participants.”

Shorter Trading Hours

Livestock trading hours for CME are being shortened at the requests of customers. Starting Monday, Feb. 29, trading hours for Live Cattle, Feeder Cattle and Lean Hog futures and options will be limited to a 4.5-hour period.

Here are the newly proposed trade hours, pending U.S. Commodity Futures Trading Commission approval:

  • CME Globex futures and options – 8:30 a.m to 1:05 p.m. Central time, Monday through Friday.
  • Open outcry options – 8:30 a.m. to 1:02 p.m. Central time, Monday through Friday.

Approximately 87% of daily livestock futures and options trade occurs during the newly suggested hours. CME livestock contracts for daily settlement period and procedures would not be affected.

CME Announces Changes to Livestock Markets



Live Cattle Delivery Point Review

Additionally, officials from The CME Group are conducting a public review of Worthing, S.D.’s delivery point for Live Cattle. This will involve a study of cattle customers to determine if a discount is needed. A review is being conducted during the entire month of February.  If changes are warranted, they will occur during the first quarter of 2016.

More Communication Between NCBA, CME Group

The CME Group and NCBA  also plan to form a working group to build on last month's discussions at the Cattle Industry Convention in San Diego. This working group would discuss potential enhancements to the cattle markets such as circuit breakers and other measures that would reduce volatility.

In San Diego, officials from CME Group outlined some of the changes being made. Cattle producers involved in the process say they are pleased with the discussions taking place. “The working relationship between NCBA and The CME Group needs to stay the way it is. We need to keep this open dialogue,” says Ed Greiman, chairman for the Cattle Marketing and International Trade Committee.

CME Group has recently worked towards improving livestock markets by introducing a messaging policy on Monday, Feb. 1.

These changes by CME Group come after an outcry from the beef industry just a month ago. NCBA officials sent a letter to Terry Duffy, executive chairman and president of CME Group, on Jan. 13. The cattle futures market dropped 16% to end 2015, rivaling volatility rates last witnessed in 1981.

Do you think these changes will help? Let us know in the comments. 

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Spell Check

Ripon, WI
2/13/2016 11:42 AM

  There should be no whining on the drop, we new it wouldn't last forever. There also was no whining when the price was going up to historic levels. Be happy with what you have and only worry about what you can control.

indy, KS
2/10/2016 08:43 PM

  so the same volume of trades will happen in a shorter time frame, and that will reduce volatility? ha Lets kick out the high frequency traders first.

chicago, IL
2/10/2016 08:24 PM

  Now to get the CME to do this for all the Ag contracts Oats, Rice, Wheat, Beans, Corn, Meal, Bean OIl and their options.


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