Groups Oppose CME Group’s Discount Plan for South Dakota Cattle Deliveries


Billings, Mont. – In comments sent today, R-CALF USA and the South Dakota Stockgrowers Association (SDSGA) jointly urged the CME Group to withdraw its plan to impose a seasonal discount of $1.50/cwt on all cattle tendered for delivery at Worthing, S.D., pursuant to the CME Group's October live cattle futures contract.

The CME Group recently announced its intention to change its live cattle futures contract specifications. The CME Group asserted its proposed financial discount on cattle deliveries to Worthing would “achieve a more equal distribution of cattle deliveries across multiple delivery points.” The deadline for public comments initially set for March 7 has been extended to March 21.
In its own analysis, the CME Group determined that more than 50 percent of all loads of cattle delivered since August 2009 were delivered to Worthing, which is the northern-most delivery point among the CME Group's 13 centrally located delivery points between Texas and South Dakota.
“This suggests that Worthing is the most competitive delivery point throughout the year for U.S. fed cattle producers that deliver live cattle,” wrote the two cattle groups.

The two cattle groups assert the proposal would disrupt competitive market forces and stymie competition by artificially penalizing cattle producers who find Worthing to be their most profitable delivery point, while simultaneously subsidizing the other 12 delivery points that are not currently competitive with Worthing.
The cattle groups further allege the proposal would lock-in industry inefficiencies, which they say is evidenced by the majority of cattle deliveries now occurring in the north while most packer-plant capacity remains in the south. This, the cattle groups say, could make the U.S. cattle industry less competitive in the global marketplace.
The third criticism leveled against the proposal by the two cattle groups is that the discount constitutes a punitive sanction imposed on certain fed cattle owners for no other reason than the geographic locations of their cattle feeding operations.
“This makes no sense and constitutes an unprecedented, unfair and punitive policy targeted at northern cattle feeders in general and Worthing-area cattle feeders in particular,” the comments state.
“The proposal to impose a discount at Worthing, South Dakota, will harm northern cattle producers, harm competition, lock-in industry inefficiencies and penalize Worthing area cattle feeders. The beneficiaries of this proposal appear only to be fed cattle buyers that have, for whatever reason, resisted long-term competitive market signals that suggest more packing capacity is needed in the north and perhaps less capacity is needed in the south,” concluded the cattle groups.


CME Group Comment Details



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