Overview of Live Cattle Contract Library Pilot

February 8, 2023

WASHINGTON, D.C., February 8, 2023 — The Cattle Contract Library pilot program is live with reporting from packers. Packers are required to submit active contract and volume information to USDA’s Agricultural Marketing Service (AMS) while still maintaining confidentiality. In order to ensure that privacy, not all of the information with regard to each contract is available and totals will not total 100%.

Weekly information is published on Monday on the program dashboard. This week, 181 active contracts have been reported, with 228 base price options. About 75% of the base price options are based on a USDA report, 10% on CME, 9% on a negotiated basis (a negotiated grid price) and 4% top of the market.

According to a USDA AMS webinar Wednesday morning, of this week’s contracts, 75% include a base price adjustment. Of those, 91% of base price options had premiums or discounts applied. In the base price selling basis portion of the report, about 30% of the week’s contracts were on dressed or HCW basis with the packer paying the freight from the feeder to the plant. Live FOB (free on-board point of origin means the cattle are sold at the farm or feeder and the buyer pays the freight from that location) contributes about 6% of contracts, while live converted FOB is about 46%. Live converted selling basis is a live price converted back to a dress price for that transaction. Of the live converted basis, the yield conversion is 63.38.

In the base price information chart, the base price is broken down into negotiated, top of market and USDA report-based source and whether or not discounts or premiums are applied. To ensure confidentiality, this portion of the library is a base price average, which this week is $1.23.

The USDA report utilization section of the library gives the breakdown of contracts that utilize USDA reports or top of the market, which together total about 80% of the contracts in the library. Of the 80%, the breakdown of contracts specifying a USDA report are detailed by which USDA report the contract utilizes. This week, 5% specified the 5 Area Weekly Weighted Average Direct Slaughter Cattle report; 23% specified the Texas-Oklahoma Weekly Direct Slaughter Cattle – Negotiated Purchases; 35% specified Kansas Weekly Direct Slaughter Cattle – Negotiated Purchases; 33% specify the Nebraska Weekly Direct Slaughter Cattle – Negotiated Purchases; and 1% specify the Iowa/Minnesota Weekly Weighted Average Cattle Report – Negotiated Purchases.

In the cattle specs and premiums/discounts portion of the report, about 88% of the contracts in the library include a quality spec, followed by weight, age over 30 months, and yield grade all listed in over 50% of contracts. The premium and discount portion can be displayed either on a per head or a cwt basis and averages are shown as an average and a 25th and 75th percentile.

The last page of the library is the volume summary, and that portion will be populated once a full month of data is reported by the packer and will appear next week. 

Source: Rachel Gabel, The Fence Post Magazine