CFTC Reports No Early Evidence
Of Cattle Futures Manipulation

DENVER — The Commodity Futures Trading Commission reports no evidence of manipulation in its preliminary look at the precipitous cattle futures market drop surrounding the March 13 rumor of foot and mouth disease in Kansas.

Jim Newsome, CFTC chairman, Friday told the National Cattlemen’s Beef Association, "We’ve got ongoing efforts, but its not obvious to us anyone deliberately acted off false information."

He said the agency is using its full resources and that no conclusions have been reached yet.

"This is an ongoing effort to look at this situation," he said.

The agency, with the help of two members of its market surveillance team, presented its data regarding the market’s performance since March 1. NCBA had requested the agency look into trading following the unexpected market drop on March 13. The CFTC’s data in some areas were very similar to what other market analysts have said: Cattle placements are above expectation; there is a large supply of competing meats; and the export market is volatile.

"In addition to large placements, carcass weights are up as well," said NCBA chief economist Chuck Lambert. "We started the year thinking that overall beef production would dip slightly in 2002. Now it appears that it may be up about one percent over a year ago. Add to this large supplies of poultry already on the market and rising pork production, and we have a scenario where total red meat and poultry production for this year may be up as much as one billion pounds."

Russia, which had placed a temporary ban on imports of U.S. poultry, lifted that ban Monday. However, the increased domestic supply had led some retailers to feature inexpensively priced poultry in their advertising instead of beef.

Wythe Willey, NCBA president and a beef producer from Cedar Rapids, Iowa, said the association will continue working to solve the complex marketing issues facing the industry. That includes a meeting with the Chicago Mercantile Exchange next month to discuss the futures contract.

Willey recently appointed a Price Discovery Think Tank that has identified four action areas to pursue. Those include: an analysis of the price discovery system for live cattle; the effect of alliances on the price discovery system; the potential of moving closer to the retail price as part of the price discovery system; and analyzing alternatives to the live cattle futures contract as risk management tools.