Commodity Futures Trading:
Preliminary Information on the Viability of the Cattle Futures Markets
RCED-87-83: Published: Jan 16, 1987. Publicly Released: Jan 16, 1987.
In response to a congressional request, GAO provided preliminary information on its study of the cattle futures markets.
GAO found that: (1) the cattle industry has suffered serious financial stress in recent years because of high interest rates, low cattle prices, and declining land values; (2) although the price of cattle today is twice what it was 20 to 30 years ago, the decline in the dollar's purchasing power has more than offset this price increase; (3) the Chicago Mercantile Exchange created the live cattle futures market in 1964, as a response to unstable prices and narrow profit margins; and (4) many within the cattle industry are uncertain of how to use the market or what its impact is on prices. GAO also found that: (1) the structure of the cattle industry has changed dramatically over the years; (2) 75 percent of the nation's beef cows live in herds of less than 200; (3) agricultural futures market mechanisms evolved primarily in response to unstable cash markets with wide price swings resulting from a glut of low-priced commodities at harvest time and high-priced commodities after harvest; and (4) there have been charges within the cattle industry that the cattle futures markets exert downward pressure on cattle prices.