The Chicago Mercantile Exchange Tuesday announced it had launched new futures contracts for 90% lean and 50% lean beef, allowing beef processors and grinders the opportunity to hedge and price their raw products for blending.
The contracts officially were listed on Monday, but because the first listed trading dates established a forward curve rather than settling on historical physical trades, settlement prices were delayed.
The contract size for each contract is 20,000 pounds with a tick size for each contract being $0.0005 per pound, or $10.00.
BTN is the product code for 90% lean beef trim futures and options and BTF is the product code for 50% lean beef trim futures and options.
The first 90% lean beef trim settlements, in cents per pound for Friday were: Aug 457.00, Sep 458.00, Oct 452.00 and Nov 449.00, the CME said. Monday’s settlement was 465.00 cents a pound, up 5.00.
The first 50% lean beef trim settlements, in cents per pound for Friday were: Aug 187.00, Sep 183.00, Oct 183.00 and Nov 184.00. 50% lean beef trim did not trade on Monday.
WHY TWO BEEF TRIM PRODUCTS?
In the physical market, 90% and 50% lean beef percentages refer to the product’s ratio of lean meat to fat. The 90% and 50% beef trims are complementary components utilized by ground beef processors to combine in calculated weights to reach standardized lean-to-fat rations like the common 80% lean beef seen in hamburgers.
While in reality there are many lean beef trims available and utilized by grinders and blenders, the 90% and 50% beef to fat ratios have risen to the top as the bench mark standards.
Thus, futures contracts in those ratios could allow blenders to hedge their costs, the CME said.
FINANCIALLY SETTLED
Both contracts are financially settled using standardized USDA reporting. For 90% trim, a monthly weighted average of weekly prices published by the USDA in reports LM_XB450 and LM_XB460 for fresh 90% trimmings. And, for 50% lean, USDA reports LM_XB454 and LM_XB460 will be used.
Expiration will occur on the last Friday of each month, and the final settlement will be on the following Tuesday using the reports issued on the prior Monday and Friday plus the previous three respective reports.
Trading will be available on the CME Globex electronic trading platform and for submission for clearing through CME ClearPort.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $238.29 per cwt to $238.75, compared with last week’s range of $248.00 to $256.91 per cwt. FOB dressed steers and heifers went for $383.40 per cwt to $385.53, compared with $389.00 to $400.06.
The USDA choice cutout Monday was up $3.29 per cwt at $370.10 while select was up $0.16 at $355.45. The choice/select spread widened to $14.65, from $11.52 with 52 loads of fabricated product and 25 loads of trimmings and grinds sold into the spot market.
The USDA-listed the daily weighted average wholesale price for fresh 90% lean beef as $460.88 per cwt, and 50% beef was $165.05.
The USDA said basis bids for corn from feeders in the Southern Plains were down $0.02 to $0.07 at $1.18 to $1.33 a bushel over the Sep corn contract, which settled at $4.49 1/4 a bushel, up $0.04 1/2.
The CME Feeder Cattle Index for the seven days ended Friday was $359.71 per cwt, down $4.32. This compares with Monday’s Aug contract settlement of $352.55, up $6.60.