CFTC Finds Nothing Unusual in Cattle Market.

April 22, 2002

A Commodity Futures Trading Commission investigation of the cattle futures contract finds "no evidence of unusual trading activity" as a result of a food and mouth disease scare among cattle in Kansas.

About 85 of all noncommercial reportable traders in live cattle futures and options held 600 or fewer contracts net long or short throughout this period. No more than six noncommercial traders held more than 2,000 net long or short contracts, the CFTC report said.

During the price declines beginning on March 13, commodity funds, as a group, sold substantial numbers of futures contracts. Through March 26, the first 10 days of that decline, funds, as a group, were reducing a net long exposure. "Eventually funds got net short in the futures market on March 27, as prices continued to trend downward," according to CFTC.

"To the extent that individual 'local' futures traders held overnight positions in cattle futures and options, they were fairly well balanced between long and short positions," the report continued.

The report was in response to inquiries and requests from the National Cattlemen's Association and other industry groups and conducted by the CFTC's market surveillance staff. The staff reviewed large-trader activity relative to the Chicago Mercantile Exchange's live cattle futures and options markets from March 1 to April 12.

"Market fundamentals, particularly those released during this period, have generally shown increasing cattle placements on feed, higher beef production, large beef cold-storage stocks, record total meat production, lower beef exports, higher beef imports, and much lower prices for pork and chicken. Although no one of these factors by itself shocked the market, all of them tend to depress cattle prices," the report said.

An executive summary of the report is available at http://www.cftc.gov/files/opa/opacftccattlereport04-02.pdf