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Copyright © 2016
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NCBA Cattle Marketing & International Trade Committee

Committee addresses futures contracts, access to markets and currency of Packers & Stockyards Act.

SAN DIEGO, Calif. (Jan. 29, 2016) — Considering the trend toward lower cattle, and especially the volatility exhibited by the futures market in recent months, Ed Greiman figured his committee’s meeting would be well-attended. The Iowa cattleman chairs the National Cattlemen’s Beef Association (NCBA) Cattle Marketing & International Trade Committee, which met Jan. 29 during the 2016 Cattle Industry Convention in San Diego, Calif.

“A lot of people want to talk about the cattle futures market, and we havea CME Group representative here to discuss what’s good or bad about futures contracts,” said Greiman in comments preceding his introduction of Terry Duffy, executive chairman and president of CME Group.

Terry Duffy Iowa cattleman Ed Greiman chairs the National Cattlemen’s Beef Association (NCBA) Cattle Marketing & International Trade Committee.

“We investigate every complaint and concern,” said Duffy.

Cattlemen have expressed concern over the impact of high-speed, electronic trading replacing traditional pit trading. NCBA has communicated that concern to the CME, asking if the abundance of limit-up and limit-down moves in the market could be caused by anything other than high-frequency trading. Adding to the concern is the influence that futures market gyrations have on the cash market.

“We want nothing more than a vibrant cash market and a vibrant futures market,” stated Duffy. “Nothing is more important than integrity in the market place.”

Terry DuffyHigh-frequency trades represent only 10% of cattle futures transactions, and large aggressive orders from manual traders lead the most significant price moves, said CME's Terry Duffy.

According to Duffy, the cattle market sees little high-frequency trading, compared to other markets. He said high-frequency trades represent only 10% of cattle futures transactions, and large aggressive orders from manual traders lead the most significant price moves. However, Duffy announced that the CME is implementing a new messaging policy for cattle futures, as of Feb. 1, which should limit high-frequency trading.

CME personnel insisted that all of its customers have equal access to the market. Customers control how price information is received and how orders are sent. He emphasized that no customer has a “speed advantage.”

Noting other factors that are influencing cattle futures, Duffy listed increased cattle supplies, beef industry public relations issues, a strong U.S. dollar that is detrimental to beef exports and China’s faltering economy.

Ed Greiman credited the CME for responding to cattlemen’s concerns, but assured the audience that NCBA will maintain its dialogue with CME management.

“We will form a working group to work with the CME and seek answers — not to find the boogeyman that some people might be looking for, but to make sure that, going forward, everything works better,” Greiman said.

Chelsea Good Chelsea Good shared LMA's contention that the Packers & Stockyards Act needs review.

In other business, Livestock Marketing Association (LMA) representative Chelsea Good addressed the committee regarding LMA’s contention that the Packers & Stockyards Act needs to be reviewed and possibly updated to reflect modern marketing practices. Good questioned whether the existing law sufficiently addresses issues such as current technology used in transfers of funds, internet auctions and dealer bond requirements.

Greiman said NCBA will take LMA’s concerns under advisement and seek input from the Grain Inspection, Packers & Stockyards Administration (GIPSA,) which has responsibility for overseeing activities covered under the Act.

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