In order to make the Chicago Mercantile Exchange Feeder Cattle Index more accurate, USDA will begin accepting feeder cattle prices reported on a delivered basis with a freight adjustment. These transactions will be included with those already being reported on a free on board basis, and will be eligible for inclusion in the Index.
"This alteration will enhance the transparency and effectiveness of the Index by allowing producers who receive feeder cattle on a delivered' basis to convert the price paid to a F.O.B. price by subtracting out the transport costs they incurred,bCrLf says Jason Jordan, manager of legislative affairs for National Cattlemen's Beef Association.
The Index is based on feeder cattle prices collected and reported by the USDA from a 12-state region and serves as a valuable risk management tool for cattle producers. Recently, especially during fall months, the validity of the Index came into question after it became clear that the reporting parameters significantly limited the volume of reportable sales.
NCBA expressed concerns to USDA about the low volume of animals being used to calculate the Index, and, collaborating with officials from the Chicago Mercantile Exchange and USDA, determined that limitations on the cattle included in the Index contributed greatly to the problem.
Under the new system, delivered-basis transactions may be converted to an F.O.B basis by the buyer or seller, and reported by telephone, e-mail or facsimile. The following stipulations apply:
- All cattle sales must originate in the 12-state region.
- Producers must provide transaction information on a consistent basis to be included.
- The buyer or seller must convert the price from delivered to F.O.B. and provide Market News with both prices.
- Origin point of the cattle must be provided.
- Names of the buyer and seller must be provided.
- Documentation verifying the aforementioned conditions must be provided to USDA upon request.