By Jennifer Whitlock
Field Editor
Due in part to the COVID-19 pandemic, beef cattle ranchers, lawmakers and even consumers are more acutely aware of market volatility.
To help ranchers and others in the beef supply chain assess and manage those risks, the CME Group recently unveiled its Boxed Beef Index, a pricing tool to report daily cutout values on Choice and Select cuts of beef.
“This will provide market participants with price discovery across the entire supply chain and is the latest innovative tool designed to help all our customers manage their risk,” Dana Schmidt, CME Group director of Corporate Communications, said. “It is intended to be a monitoring tool to help users make informed risk management decisions.”
The CME Boxed Beef Index is a five-business day, volume-weighted measurement of daily Choice and Select cutout prices. The data is collected by the U.S. Department of Agriculture (USDA) and published in the National Daily Boxed Beef Cutout and Boxed Beef Cuts – Negotiated Sales – Afternoon report.
To determine the index, CME Group multiplies the daily number of loads by the corresponding daily cutout price for both Choice and Select, then adds them together to tabulate the total daily value. The results are then added to the previous four consecutive daily values to create a five-day running total value.
Daily loads of Choice and Select are tallied to determine the total daily load count. The most recent total daily load count is added to the previous four consecutive daily load counts to determine the five-day total load count.
Finally, to determine the Boxed Beef Index value, the group divides the five-day total value by the five-day total load count. The result is a five-business day weighted average price of beef carcass values in dollars per hundredweight ($/cwt).
According to CME Group’s website, key benefits include the ability to track supply and demand dynamics of beef transactions on the spot cash market and to compare the value of the CME Boxed Beef Index to USDA prices of negotiated fed cattle.
Commercial hedgers have “expressed a desire” for a beef price-tracking index, according to CME Group. It cautions the Boxed Beef Index is not a tradeable product, but like the company’s Pork Cutout Index, it may become one in the future.
For more information, visit CME Group’s Boxed Beef Index.