Chicago traders suspect mad cow news was leaked
2004-05-14 20:58:40 GMT (Reuters)
By Bob Burgdorfer
CHICAGO, May 14 (Reuters) - Chicago Mercantile Exchange cattle traders on Friday said it is very possible news of the first U.S. case of mad cow disease leaked out before the official announcement in late December.
The Commodity Futures Trading Commission said on Thursday it is investigating trading in CME cattle. Some ranchers believe unusual trades prior to the U.S. Agriculture Department announcement on Dec. 23 that a Washington state cow had mad cow disease indicated some traders knew of the case in advance.
"There have always been leaks of sacred government reports," said a CME trader, who asked not to be identified.
Of particular interest to investigators is trading on Dec. 9, the day the Washington cow was slaughtered. Also on that day CME cattle futures closed down the daily limit of 1.50 cents per lb.
But CME traders were reluctant to blame the early December drop in cattle futures to traders having prior knowledge of the mad cow case.
"Basically, what was happening then was the cash market was breaking. Cash was breaking because you were heading into the holidays when your beef demand weakens," said Jim Clarkson, analyst with Chicago-based A. and A. Trading Inc.
CME cattle futures peaked in early November at a record 104.25 cents per lb, in reaction to strong domestic and export demand for beef and tight supplies of market-ready cattle.
But by early December cattle prices were trending lower as demand for beef was easing. For example, a week before the Washington cow was slaughtered CME cattle prices closed sharply lower on Dec. 3 and on Dec. 4.
Despite the sliding cash cattle markets then, Clarkson believes news of the mad cow case may have leaked out prior to Dec. 23.
"It is hard to believe in the cattle industry that something like that could be kept quiet for two weeks," said Clarkson. "I'm guaranteeing you that somebody knew something."
But he said it is not clear if trading on such beforehand knowledge is illegal.
"The only thing that I could see as an impropriety would be if an official from the USDA somehow leaked this information to someone. I would think that would be illegal, but I couldn't quote you a regulation on it," said Clarkson.
CME cattle prices plunged 20 percent several days after Dec. 23 as foreign buyers banned U.S. beef and CME traders feared U.S. consumers would shun beef.
In the months that followed, domestic beef demand stayed strong and CME cattle futures gradually recovered some of what they lost in late December and early January. But many foreign buyers continue to ban U.S. beef.
The Chicago Mercantile Exchange on Friday said it is cooperating fully with the CFTC and is providing it access to market data.
The National Cattlemen's Beef Association, the nation's largest cattle organization, said it contacted the CFTC right after the Dec. 23 announcement asking that the agency monitor cattle futures trading.
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