The Chicago Mercantile Exchange (CME) Group this week published a special executive report announcing an increase in the daily price limits for live and feeder cattle. The changes will take effect Monday, June 3.
For live cattle, the new initial limit will be $7.50/cwt., up 75¢ from the current initial limit of $6.75/cwt. The new expanded limit for live cattle will be $11.25/cwt. For feeder cattle, the new initial limit of $9.25/cwt. is $1.00 higher than the current initial limit of $8.25/cwt. The new expanded limit for feeder cattle will be $13.75/cwt.
Under the amendments to Rules 10102.D and 10202.D, which were adopted in 2020, the daily price limits are adjusted annually through a formula based on the June Live Cattle Contract’s performance over the 45 consecutive trading days preceding the last trading day of the nearest April contract. Expanded limits are activated on the trading day following a limit event in any of the four front-most contracts. Daily price limits revert to the initial limit on the trading day following settlement of all four front-most contracts within the initial limit.
NCBA policy opposes formula-based variable price limits. These new limits present margin implications and potential for large intra-day moves. NCBA has raised these concerns with CME officials and is working to find solutions amenable to both the buy and sell sides.