The Chicago Mercantile Exchange will no longer accept delivery of cattle fed the growth additive Zilmax on Oct. 7 to conform with exchange guidelines for deliveries against CME live cattle futures, said CME in a statement on Monday.
The guideline will be implemented beginning with October deliveries on Oct. 7, the CME managing director of Commodity Research and Product Development, David Lehman, told Reuters on Monday.
"We are letting the market know these Zilmax cattle no longer are merchantable in our view from a contract specification perspective because they will not be accepted by a majority of our approved slaughterhouses," Lehman said.
The exchange based its decision after two major packers discontinued purchases of Zilmax-fed cattle, with the possibility that others may follow suit, the exchange said.
Tyson Foods Inc, the country's biggest meat processor, in August informed cattle feeders it would not buy Zilmax-fed cattle after Sept. 6 amid worries about cases of cattle with difficulty walking.
Cargill Inc, the United States' third largest meat producer, on Sep. 30 halted purchases of cattle given the additive.
Although there was no direct link to use of Zilmax, focus on the additive prompted manufacturer Merck and Co to suspend Zilmax sales in Canada and the United States to conduct further research.
Terms of CME's live cattle futures require that cattle received during the delivery process be "merchantable" (or healthy and not crippled or sick) and readily salable into normal commercial marketing channels.
"This notice clarifies that cattle which have been fed additives which prohibit them from being purchased for slaughter under current commercial practices imposed by major cattle slaughter facilities are unmerchantable and are to be excluded from the delivery unit," according to the exchange's statement.