CME announces provisions for heifer delivery

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Cattle traders have for some time wanted the option of delivering heifers against the live-cattle futures contract. Groups such as NCBA and the Texas Cattle Feeders Association have worked with the CME Group for two years on the issue, and CME now has amended the live-cattle contract to allow heifer deliveries.

The new delivery specifications will take effect with the launch of the August 2015 live-cattle contract. That contract becomes active on Monday, March 17, 2014.

CME lists several provisions for loads of heifers to qualify for delivery against the futures contract.

  • Heifers will be subject to the same yield, quality and age specifications as steers.
  • Heifers will be deliverable at par value with steers.
  • Delivery loads must be all-steers or all-heifers and noted as such on the delivery tender.
  • No individual heifer may weigh less than 1,050 or more than 1,350 pounds.
  • Discounts for hardbone and dark-cutter carcasses are based on USDA 5-Area Weekly Weighted
  • Average Direct Slaughter Cattle – Premiums and Discounts report.
  • Heiferettes, cows and bred heifers are not deliverable for live deliveries. A penalty of $2.50 per hundredweight will be applied to a load of live heifers that is declared undeliverable.
  • USDA graders shall determine which animals are deliverable.
  • Parties tendering an all-heifer load will be required to sign two affidavits: the Progestin Supplement Affidavit and the Open Heifer Protocol Affidavit

As with steers, the unit of trading for delivery will be 40,000 pounds of 55 percent Choice, 45 percent Select grade live heifers.

Quality Grade adjustments for all delivery units will make use of the live weight equivalent of the Choice-

Select boxed beef spread calculated from information reported by USDA, in dollars per hundredweight, for the day of tender. CME will use the USDA By-Product Drop Value report for the day of tender to calculate the condemned liver factor used in carcass-graded deliveries.

Read more details in the Special Executive Report from the CME Group.

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MT  |  March, 13, 2014 at 10:01 AM

What does this suggest to those prognosticators of herd expansion via heifer retention?

March, 14, 2014 at 01:22 PM

It has no suggestion of possible heifer retention. This is a marketing issue. This will be a step to update the current CME contract and needed in the industry.

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