Kleist Comments


CATTLE: Cash cattle last week $126.00 (steady) north/south live so far; $198.-199.00 north dressed (dn. $1-2.00); boxed loads cut outs——-not available: Carcass Equivalent: Not available.

COMMENTS: October’s premium holding well all-in-all and as before, weather forecasts might keep the BBQ’s a’grillin; open interest little changed in total, volume moderate; deliveries 23; I am leaning more towards hedging December’s premium than buying a standard break there. Otherwise still aside in here.


Interior cash hogs yesterday not available, last rough avg. $89.50; cut outs n/a; lean index as of 09/27 @ $96.30, no longer available.

COMMENTS: Cash hogs seen about steady but then again, why not? Seeing where the last interior markets were and guessing no major advances/declines since the government shut down, October might merely be priced right. Open interest fell 2,207 led by October off 2294 amid light volume. Nuetral fell in here and aside futures.

DJ CME to Settle October Hog Contract Using Volume-Weighted Futures Data
–CME to determine final settlement value of October 2013 hog futures using average futures price data
–Exchange says it will calculate the “volume-weighted average price” for two days prior to expiration
–October hog futures scheduled to expire October 16

By Kelsey Gee

CHICAGO–CME Group Inc. (CME) said it will alter the way that the October lean-hog futures contract is settled, if the U.S. government remains shut down through October 11.

The letter to customers sent by the world’s biggest futures exchange operator late Monday was the latest development in a spate of disruptions to the $11.6 billion livestock futures market because of the absence of closely watched federal data.

Hog futures are cash settled upon their expiration using a two-day average of prices paid by packers for hogs in the cash markets, or what the exchange calls the CME Lean Hog Index. Those prices are reported by an arm of the U.S. Department of Agriculture, which has furloughed the majority of its employees, following the lapse in federal government funding on October 1. Since that time, the AMS has stopped issuing the daily price reports, and the CME has said they are no longer able to calculate the index.

The notice to CME customers said the final settlement for the October 2013 hog futures contract “will be calculated by using the volume-weighted average price of the October 2013 futures contract for trades occurring during the 2-day period of October 11 and 14, 2013” for both electronic and pit trading. The CME rulebook states that under the authority of a declaration of force majeure, the exchange operator’s CEO, president, or chief operating officer shall “take such action as he deems necessary under the circumstances” if a determination is made that “delivery or final settlement of any contract cannot be completed.”

The front-month hog futures contract, which declined 0.3% to 91.6 cents a pound on Monday, expires on October 16. Trading volumes in lean-hog futures were 40% lower on Friday than they were on Sept. 30, the day before the government shutdown began.

The CME said last Tuesday the lack of USDA data could disrupt the October 2013 contracts for live cattle, lean hogs and feeder cattle futures and options.

In that statement to customers, the CME said that a prolonged federal shutdown “may require the exchange to modify the current settlement procedures” for the affected contracts.

The USDA last week began furloughing staff who produce numerous daily and weekly reports on data, including cash prices for agricultural products that are used as benchmarks for futures contracts used to hedge against big price swings in commodities.

Kleist Comments

This is John Kleist, of Kleist Ag Consulting.
Questions? Email me: johnwkleist@sbcglobal.net

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