Rarely used emergency measures to ease volatility in livestock futures provided support for the market on their first day of implementation on Thursday, making it unlikely the Chicago Mercantile Exchange will continue to use them as it was forced to do a decade ago, the last time it took such steps.
The CME Group Inc, the world's largest livestock futures exchange, raised the limit on price moves for feeder cattle futures to $4.50 per hundredweight from $3.00, effective Thursday, after five days of falls to the limit.
The slide in thinly traded feeder cattle futures had dragged down the more active live cattle market, which closely reflects near-term prices for slaughter-ready cattle.
Year-to-date feeder cattle volume totals 1.9 million contracts, compared with 12.6 million for live cattle, based on CME data.
The CME took the highly unusual measures to insure risk transfer and price discovery as trades were being implemented, CME spokesman Chris Grams told Reuters.
From Friday, the limits can be expanded to $6.75 per hundredweight on any business day if one of the two contract months, January and March, settles at the daily limit on the previous trading day, according to the CME.
"The last time the CME did this in both live and feeder cattle was on Christmas Eve 2003 in response to another unprecedented situation involving the finding of mad cow disease in Washington state," Grams said.
The CME again increased the daily limits for the contracts a few days later on that occasion, he added.
"There is not a specific end date to the expanded limits at this point," said Grams, adding that the exchange continues to monitor the situation.
CME feeder cattle futures have been falling on slumping returns for young calves, known as feeder cattle, partly due to lower prices being offered for cattle ready for slaughter. That, coupled with a recent bump in corn costs, has discouraged feedlots from buying calves for fattening.
After a choppy session, CME feeder cattle deferred months closed more than 1 percent higher and live cattle futures settled up their $3.00 price limit.