Cattlemen Talk Futures with CME

May 13, 2002

The use of cattle futures contracts as risk management tools by cattle producers was one of the topics of discussion when leaders of the National Cattlemen's Beef Association (NCBA) met with Chicago Mercantile Exchange (CME) officials last week in Chicago. NCBA and CME officials agreed to establish a joint working group to assess potential new risk management instruments and evaluate proposals to enhance the futures contract as a risk management tool.

Among the issues NCBA will raise in this joint working group are cash settlements, weight specifications consistent with carcass delivery, serial contracts, heifer delivery and a boxed beef contract.

The joint group will provide a progress report to the industry at the 2002 Cattle Industry Summer Conference in Reno in mid-July. In addition, NCBA and CME will develop a risk management education program for producers.

Eric Davis, NCBA president-elect and chairman of the organization's Price Discovery Think Tank, said he was encouraged by the meeting and believes CME listened to the issues and concerns that NCBA raised on behalf of cattlemen. He also thinks steps initiated at the meeting will lead to benefits for cattle producers.

"Our membership expects NCBA to protect their interests, as well as be a catalyst for positive change," said Davis, a beef producer from Bruneau, ID. "We are about developing solutions to problems, not about creating barriers. But the fact is that some cattlemen have lost confidence recently in futures markets in risk management. We want to work with CME to make sure the cattle futures contracts are an appropriate risk management tool."

In addition to Davis, attending the meeting on behalf of the industry were Jamie Willrett, a Malta, IL, cow/calf operator; Bill Rhea, a feeder from Arlington, NE; Ken Bull, a packer representative; NCBA CEO Terry Stokes, Chandler Keys, NCBA vice president for policy; and Chuck Lambert, NCBA chief economist.