Chicago | Reuters — A U.S. watchdog agency will launch a review of cattle pricing, including the impact of high-frequency trading on futures, after ranchers complained about a sharp price drop last year.
The U.S. Government Accountability Office (GAO) has accepted a request from the Senate judiciary committee to study the reasons for the decline, an agency spokesman said Thursday.
The GAO will review “what is known about the extent to which high-frequency trading in cattle futures contracts has contributed to price fluctuations,” he said. It also will assess how changes in cattle trading over the past decade may have affected price swings in recent years, he added.
The agency has no time frame yet for completing its review, the spokesman said.
Futures and cash markets for cattle have come under scrutiny over pricing following a setback in the second half of last year from record levels reached in 2014.
In January, R-CALF USA, a meat producers’ group, asked the Senate judiciary committee to investigate the decline and alleged that packers had colluded to manipulate markets. Last month, committee members requested the GAO review the reasons for the drop, instead of taking it up themselves.
The National Cattlemen’s Beef Association, another producers’ group, has attributed price swings to high-frequency traders.
CME Group, which operates U.S. cattle futures markets, has taken steps to reduce volatility, including cutting trading hours.
The exchange operator has said high-frequency trading accounts for 10 per cent of the volume in CME’s cattle markets and 50 per cent of its overall average daily volume.
— Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago.