NCBA Opposes Merc Plan to Double Daily Limit on Futures

Cattlemen want more dialogue with the Chicago Mercantile Exchange (CME) on how to deal with irregular market activity — such as what occurred this fall — and oppose the Exchange’s proposal to double the daily price limit on live cattle futures contracts. 

In comments submitted to the Commodity Futures Trading Commission Dec. 11, NCBA President Eric Davis wrote: “We cannot support the CME request to double the daily price limit from the current $1.50 per hundredweight to $3 per hundredweight. …This change will have a direct result upon margin limits, lending requirements and financial arrangements between producers and their lending institutions.” 

The CME proposal reflects a response to the unusual market activity that occurred this fall when price and basis levels were at extraordinary levels.  In its comments, NCBA urges more discussion to develop an appropriate method of dealing with this type of market activity should it occur again.

“We expect this to be a very important topic of discussion at the NCBA Live Cattle Marketing Committee meeting on Jan. 30,” says NCBA Director of Legislative Affairs Bryan Dierlam. “In the meantime, we are asking the CME to withdraw this proposed rule change, and we have invited the CME to send representatives to the Jan. 30 committee meeting in Phoenix, Ariz.” 

“We are more than happy to engage in the discussion that will lead to a mutually agreeable solution so that we can avoid the disruptions caused by atypical market activity and protect the financial stability of our members,” writes Davis.   

NCBA is asking the Commodity Futures Trading Commission to deny the rule change should the Chicago Mercantile Exchange not withdraw its proposal.