A better understanding of a cattle contract library


A better understanding of a cattle contract library

An economist in agriculture says that reliable reporting of market data is essential for price discovery and transparency in cattle markets.

Kenny Burdine of the University of Kentucky says a cattle contract library would serve as a price catalog and specify contract details.
“In most cases, that means what market the formulas and then the other specifications of the contract are based on,” he says. “This could include any premiums, deliveries or, in some cases, provisions for changes in food costs.” Burdine says it could be modeled after the contract library that is currently used in the pig market.

He tells Brownfield that a cattle contract library would be an additional marketing tool for producers. “Knowing what contracts exist and knowing how some of them are written and knowing what some of them are based on, can give manufacturers additional tools in their toolbox,” he says. “While looking at the trading options for the cattle they sell.”

And while a contract library would help improve price discovery, Burdine says manufacturers also need to understand how to use them to their advantage. “And you really understand what many of the provisions mean,” he says. “In some cases, it can be very simple, and in other cases it can be less familiar. So it’s up to the producers who do business in the feed cattle market to understand that. “

Burdine and Mississippi State University economist Josh Maples co-authored a paper on market reporting and transparency. A link to it can be found HERE.

AUDIO: Kenny Burdine, University of Kentucky A better understanding of a cattle contract library

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