Note on trader concentration effects in feeder cattle futures and comparison with live cattle

✍ Scribed by Charles M. Oellermann; Paul L. Farris

• Book ID: 102843930
• Publisher: John Wiley and Sons
• Year: 1988
• Tongue: English
• Weight: 602 KB
• Volume: 8
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.3990080110

✦ Synopsis

ublic concern continues about the effects of cattle futures trading on cash P prices. This note reports the results of an analysis of the effects of concentration in the feeder cattle futures contract on futures and cash prices. It complements a previous study of concentration in live cattle futures.

Using data available from the Commodity Futures Trading Commission (CFTC) for 1977 -1981, the authors previously examined the effects of concentration in live cattle futures trading on the Chicago Mercantile Exchange (CME) . Buyer and seller concentration were found to be relatively low, and changes in concentration appeared not to be strongly associated with futures price changes nor the futures-cash basis.

CFTC data for 1977 -1981 indicate that levels of concentration in feeder cattle futures were significantly higher than those in live cattle futures. This study was conducted to learn whether these higher concentration levels had significant effects on price and basis for feeder cattle during 1977 -1981. Three aspects were examined:

(1) Relations between four-firm concentration ratio changes and price changes at selected times during the final two months of trading in futures contracts. (2) Lead-lag relations between daily changes in four-firm concentration and price, and (3) Relations between changes in four-firm concentration and futures-cash basis.