Organizers of an online U.S. cattle auction that ranchers and traders had hoped would help restore transparency to livestock pricing nationwide said on Wednesday they would suspend activity indefinitely after just four sessions.
The Fed Cattle Exchange, which held its first live feeder cattle auction on May 25, determined that it needed to halt operations to fix technology problems, according to a notice posted on its website.
Superior Livestock Auction, a well-known cattle auctioneer that owns the exchange, also wanted to address some participants' concerns about the format of the market, President Danny Jones said in an interview.
The suspension came as a blow to producers and traders who have worried for years that the U.S. method for pricing cattle headed to slaughter could incorrectly value animals and bring in less money for those who raise livestock.
"It is an unfortunate pause that we're going to need to take, but it's necessary," Jones said.
The biggest U.S. meat packers, Cargill Inc, Tyson Foods Inc, JBS USA and National Beef Packing Co , bought cattle on the exchange, participants said.
Producers had hoped the exchange would eventually improve the pricing of U.S. cattle heading to slaughter, which could affect prices in supermarkets.
The pricing system is based largely on a diminished market of cash sales that are concentrated in certain geographic areas.
Cash sales, which producers and meat packers negotiate a few weeks before cattle are killed, have declined over the past decade as producers have increasingly locked in prices months in advance. Still, prices for the advance sales are usually determined using average prices in the cash market.
The Fed Cattle Exchange was created this year to provide the industry with more transactions to consider when determining the average cash price. That could make the average more reliable and reflective of the overall market.
"Everyone recognizes that we need more cash trade into the mix," Jones said. "We're going to come back and make a strong push as soon as possible."
Decreasing transparency in the cash cattle market is one factor that has driven high volatility in futures contracts traded at CME Group Inc, according to the exchange operator.
The company has taken steps to reduce volatility, including cutting trading hours for cattle, and is working with the National Cattlemen's Beef Association to improve the futures markets.
Separately, a U.S. watchdog agency has said it is launching a review of cattle pricing after ranchers complained about a sharp price drop last year.