U.S. government investigators are looking at cattle futures trading patterns during December to determine whether any unusual activity occurred related to the announcement of a case of mad cow disease Dec. 23, an official said Tuesday.
“We are looking at the trading activity that surrounds that time frame” between the Dec. 9 slaughter of a dairy cow in Washington state and the Dec. 23 announcement by the U.S. Department of Agriculture that the animal had mad cow disease, said Alan Sobba, director of external affairs for the Commodity Futures Trading Commission.
David Prosperi, spokesman for the Chicago Mercantile Exchange, said, “We normally do not comment on investigations, but we are cooperating fully with the CFTC.”
The investigation was first reported in Tuesday’s Wall Street Journal. The newspaper said CFTC investigators were looking at investors who may have taken short positions in live-cattle futures, betting on a price decline just before the Dec. 23 announcement.
Sobba said it was “routine” for the CFTC to launch an investigation “any time there’s increased market volatility or unusual circumstances in the marketplace, no matter what the commodity.”
Sobba said he did not know how long the investigation would take.
Chicago traders said they had no early information on the mad cow finding and noted that prices were higher the two days before the announcement due to strong fundamentals.
“The futures market closed strong the day the story was released, and was supported by stong near-term fundamentals ... No one had a clue about the mad cow,” said Phil Stanley, independent livestock analyst and live cattle futures trader.
Stanley also noted that hedgers were even lifting short positions because of the strong fundamentals.
“I talk to a lot of cash (market)-connected guys and there were no rumors at all,” said Jim Sauter live and feeder cattle futures trader.
Karen Batra, spokeswoman for the National Cattlemen’s Beef Association in Washington, said her organization got word of the mad cow case shortly before noon Dec. 23. USDA made its announcement to the public at 5:30 p.m. EDT that day. Batra said she knew of no concerns within NCBA of improper trading related to the Washington state cow.
Cattle futures prices fell significantly following the Dec. 23 announcement of the single case of mad cow disease as foreign countries immediately imposed bans on U.S. beef imports.
Sobba said the CFTC investigation began “immediately” after the positive finding of mad cow disease, an animal brain-wasting illness that has been linked to the deaths of 140 humans suspected of eating contaminated meat.
Sobba said he did not know if CFTC investigators had found any unusual trading activity.
The Senate Agriculture Committee on Tuesday reviewed steps taken by USDA and the Food and Drug Administration to head off new cases of mad cow disease.
Some Senate Democrats renewed their call for creating a new federal agency to handle all food safety oversight.
“We need a single food agency. We currently have over a dozen different agencies with oversight of food,” said Sen. Richard Durbin of Illinois.