• Unmerchantable Cattle for CME Deliveries

      • To
      • Members, Member Firms and Market Users
      • From
      • Research and Product Development
      • #
      • SER-6849
      • Notice Date
      • 23 September 2013
      • Effective Date
      • 23 September 2013
    • Under the provisions of the CME rules noted below, no cattle which are unmerchantable shall be deliverable.
      In August of 2013, Tyson Fresh Meats, Inc. notified cattle feeders that, as of September 6, 2013, it would suspend its purchases of cattle that have been fed zilpaterol. In early September of 2013, Cargill, Incorporated provided notice of its October suspension of purchases of zilpaterol-fed cattle in North America, pending further research. Other major slaughter houses may enforce similar policies without formal market notice. The terms of the CME’s Live Cattle Futures contract requires that cattle received in the delivery process be merchantable and therefore readily salable into normal commercial marketing channels. This notice clarifies that cattle which have been fed additives which prohibit them from being purchased for slaughter under the current commercial practices imposed by major cattle slaughter facilities are unmerchantable and are to be excluded from the delivery unit.
       
      Live Cattle Futures
      10103.B.-Live Graded Deliveries
      4. Par Delivery and Substitutions
      a. Par Delivery Unit. A par delivery unit is 40,000 pounds of USDA estimated Yield Grade 3, 55% Choice, 45% Select quality grade live steers, with no individual animal weighing less than 1,050 pounds or more than 1,500 pounds.
      Par delivery units shall have an estimated average hot yield of 63%.
      All cattle contained in a delivery unit shall be healthy. No cattle which are unmerchantable, such as crippled, sick, obviously damaged or bruised, or which for any reason do not appear to be in satisfactory condition to withstand shipment by truck shall be deliverable. No cattle showing a predominance of dairy breeding or showing a prominent hump on the forepart of the body shall be deliverable. Such determinations shall be made by the grader and shall be binding on all parties.
       
      10103.C.-Carcass Graded Deliveries
      5. Par Delivery and Substitutions
      a. Par Delivery Unit. A par delivery unit, shipped to an approved slaughter plant designated by the buyer, shall be 40,000 pounds of live steers which produce Yield Grade 3, 55% Choice, 45% Select grade steer carcass beef, with no individual carcass weighing less than 600 pounds or more than 900 pounds.
      Par delivery units shall have an actual average hot yield of 63%.
      All cattle contained in a delivery unit shall be healthy. Cattle which are unmerchantable, such as crippled, sick, obviously damaged or bruised, or which for any reason do not appear to be in satisfactory condition to enter normal fresh meat marketing channels shall be excluded. No cattle showing a predominance of dairy breeding or showing a prominent hump on the forepart of the body shall be deliverable.
      For carcass graded deliveries only, a “prominent hump on the forepart of the body” shall be defined as a hump on a live animal which, when measured on the resulting carcass, is expected to exceed 2 inches in height when measured from a line formed by the extension of the top line (including the fat) and measuring the lean muscle (excluding the fat) perpendicular to that line in the center of the hump. Any animal(s) with a hump estimated to exceed 2 inches when measured in this manner shall be excluded from the delivery unit. If the delivered live weight falls below the 5% tolerance as specified in Rule 10103.C.5.f, the seller is responsible for replacing the removed animal(s) until the minimum live weight is achieved.
      Such determination shall be made by USDA personnel and shall be binding on all parties. All resulting carcasses must be merchantable. Carcasses which are not suitable to enter normal fresh meat marketing channels will be excluded from the delivery unit.
       
      Should you have any questions regarding this Special Executive Report, please contact one of the following individuals: David Lehman, Managing Director, Commodity Research and Product Development, 312-930-1875, David.Lehman@cmegroup.com or Jack Cook, Director, Commodity Research and Product Development, 312-930-3295, Jack.Cook@cmegroup.com.
       
      For media inquiries concerning this Special Executive Report, please contact CME Group Corporate Communications at 312-930-3434 or news@cmegroup.com.
       
      © 2013 CME Group Inc. All rights reserved.  

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