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June 28, 2018
Hedging & Options
National Cattlemen’s Beef Association1
Date: January 26, 2018
1This project was conducted in response to a Request for Proposal: Live Cattle Physical Futures Delivery Academic
Research from the NCBA‐Live Cattle Marketing Committee. We acknowledge the many industry participants who
took time to visit with us in numerous interviews we conducted in completing this project as well as the NCBA
Working Group members who provided invaluable feedback on this report. We are also grateful to CME Group for
providing live cattle futures delivery data used in this report.
i
PREFACE
This project was launched to increase understanding of issues surrounding live cattle delivery,
how delivery methods might be enhanced, and to assess pros and cons of various physical
delivery alternatives. The project involved interviews with live cattle futures market
participants as well as affiliated service and regulatory agencies. We pursued ideas and
concerns of short hedgers, long hedgers, and speculators to listen to stakeholders from all
perspectives on the contract. We visited with market participants who have never delivered or
accepted delivery as well as those who have been among the most prominent in making and/or
taking delivery in recent years. Discussions were informative, candid, and included sensitive or
confidential information. We are indebted to all who took time to visit with us and share their
opinions.
We found opinions and perceptions regarding the current live cattle contract delivery process
are strongly held. There is consensus on certain issues whereas, on other topics, views are
polarized. This report is our attempt to combine what we heard collectively from those
interviews with our own data analysis to compare current delivery practices with new
alternatives. A better understanding of the trade‐offs surrounding delivery alternatives will
enhance the risk management role of the live cattle futures contract well into the future.
We thank NCBA for engaging us in this important and interesting project. We look forward to
continuing to work with the industry on these and related issues when our assistance can be of
value.
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