SUBMISSION COVER SHEET

IMPORTANT: Check box if Confidential Treatment is requested

Registered Entity Identifier Code (optional): 16-458

Organization: Chicago Mercantile Exchange Inc. ("CME")

Filing as a: DCM SEF DCO SDR 

Please note - only ONE choice allowed.

Filing Date (mm/dd/yy): 11/14/16 Filing Description: 40.4(b)(5) Request for NonMaterial Agricultural Rule Change Regarding Amendments to Live Cattle Futures 

Contract and Related Delivery Rules in CME Chapter 7 (“Delivery Facilities and 

Procedures”)

SPECIFY FILING TYPE 

Please note only ONE choice allowed per Submission.

Organization Rules and Rule Amendments

Certification § 40.6(a)

Approval § 40.5(a)

Notification § 40.6(d)

Advance Notice of SIDCO Rule Change § 40.10(a)

SIDCO Emergency Rule Change § 40.10(h)

Rule Numbers: 

New Product Please note only ONE product per Submission.

Certification § 40.2(a) 

Certification Security Futures § 41.23(a)

Certification Swap Class § 40.2(d)

Approval § 40.3(a)

Approval Security Futures § 41.23(b)

Novel Derivative Product Notification § 40.12(a)

Swap Submission § 39.5

Official Product Name: 

Product Terms and Conditions (product related Rules and Rule Amendments)

Certification § 40.6(a) 

Certification Made Available to Trade Determination § 40.6(a)

Certification Security Futures § 41.24(a)

Delisting (No Open Interest) § 40.6(a) 

Approval § 40.5(a)

Approval Made Available to Trade Determination § 40.5(a)

Approval Security Futures § 41.24(c)

Approval Amendments to enumerated agricultural products § 40.4(a), § 40.5(a)

“Non-Material Agricultural Rule Change” § 40.4(b)(5)

Notification § 40.6(d)

Official Name(s) of Product(s) Affected: See filing. 

Rule Numbers: See filing. 
1 North End Avenue New York, NY 10282 T 212 299 2200 F 212 299 2299 christopher.bowen@cmegroup.com cmegroup.com

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Christopher Bowen 

Managing Director and Chief Regulatory Counsel

Legal Department

November 14, 2016

VIA ELECTRONIC PORTAL

Mr. Christopher J. Kirkpatrick

Office of the Secretariat

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, D.C. 20581

Re: CFTC Regulation 40.5(b)(5) Request for Non-Material Agricultural Rule Change. 

Amendments to the Live Cattle Futures Contract Related Delivery Rules in CME 

Chapter 7 (“Delivery Facilities and Procedures”).

CME Submission No. 16-458

Dear Mr. Kirkpatrick:

Pursuant to Commodity Futures Trading Commission (“CFTC” or “Commission”) Regulations 40.4(b)(5), 

Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) is requesting a determination of non-materiality 

for amendments to the rules for delivery for live cattle in connection with its Live Cattle Futures contract 

(the “Contract”) (Rulebook chapter: 101; Clearing Code: LC; CME Open Outcry Code: LC; CME Globex 

Code: LE; CME ClearPort Code: 48) effective on Wednesday, November 30, 2016.

Specifically, CME is amending Chapter 101 (“Live Cattle”) and CME Chapter 7 (“Delivery Facilities and 

Procedures”) (collectively, the “Amendments”) to list delivery territories for the Contract and the 

associated delivery locations within each territory. The Amendments shall apply to all contract months 

beginning with the December 2016 contract, which is currently listed.

Currently, CME Rules 10103.B.4.G and 10103.C.5.H provide that par deliveries of live and carcass 

graded beef cattle shall be made at or, if carcass graded, have been originally tendered to approved 

stockyards as enumerated within the Chapter 101. The Amendments provide territories in which 

deliveries can be made and/or tendered to and then shall list the delivery point stockyards associated with 

each territory in as indicated in the table below. 

Live Cattle Delivery Territory Associated Stockyard Delivery Points

Iowa / Minnesota / South Dakota Worthing, SD

Colorado Wray, CO

Nebraska Columbus, NE; North Platte, NE; Ogallala, NE

Kansas Dodge City, KS; Pratt, KS; Syracuse, KS

Texas / Oklahoma / New Mexico Amarillo, TX; Clovis, NM; Texhoma, OK; Tulia, TX

All delivery territories prior to the October 2017 Contract will be valued at par. Any deliveries originally 

tendered to a stockyard in the “Iowa / Minnesota / South Dakota” territory during an October contract 

month delivery period beginning with the October 2017 contract month will have a $1.50/cwt discount. 

The valuing of the delivery territories is consistent with the current valuing of each existing delivery point 

stockyard location. Therefore the value of the Contract is not expected to change in any material way as 

a result of the Amendments.
1 North End Avenue New York, NY 10282 T 212 299 2200 F 212 299 2299 christopher.bowen@cmegroup.com cmegroup.com

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Note that the requirements and process for tendering certificates of delivery to stockyards and making 

delivery of cattle at stockyards or slaughter plants will not change as a result of the Amendments. No 

delivery point stockyards or slaughter plants will be added or removed at this time.

The Amendments are provided in Appendix A and Appendix B in blackline format.

The Exchange reviewed the designated contract market core principles (“Core Principles”) as set forth in 

the Commodity Exchange Act (“CEA” or “Act”) and identified the following Core Principle as potentially 

being impacted: 

 Availability of General Information: The Exchange shall publish on its website information in 

regard to Amendments. The marketplace will be notified of the Amendments via a Special 

Executive Report (“SER”). The SER will also be posted on CME Group’s website.

Pursuant to Section 5c(c) of the Act and CFTC Regulation 40.4(b)(5), the Exchange hereby certifies that 

the Amendments comply with the Act, including regulations under the Act. There were no substantive 

opposing views to this proposal. 

The Exchange certifies that this submission has been concurrently posted on the Exchange’s website at

http://www.cmegroup.com/market-regulation/rule-filings.html.

Should you have any questions concerning the above, please contact the undersigned at 212-299-2200 

or via e-mail at CMEGSubmissionInquiry@cmegroup.com.

Sincerely,

/s/ Christopher Bowen

Managing Director and Chief Regulatory Counsel

Attachments: Appendix A – CME Rulebook Chapter 101 (blackline format)

Appendix B – CME Rulebook Chapter 7 (blackline format)
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Appendix A

(Additions are underscored; deletions are struckthrough.)

CME Rulebook

Chapter 101

Live Cattle Futures

10103. SETTLEMENT PROCEDURES

(FOR ALL CONTRACT MONTHS PRIOR TO OCTOBER 2017)

10103.A. Sources and Calculation of Adjustment Factors 

Quality grade adjustments for all delivery units will make use of the live weight equivalent of the ChoiceSelect boxed beef spread calculated from information reported by USDA (in $/cwt.) for the day of tender 

in the National Daily Boxed Beef Cutout and Boxed Beef Cuts – Negotiated Sales – Afternoon report. 

This is referred to hereafter as the Live Equivalent Choice-Select Spread (LECSS) and is computed by 

subtracting the “Selected Boxed Beef Cut-Out Value” from the “Choice Boxed Beef Cut-Out Value” and 

multiplying that result by 0.0063. 

The USDA By-Product Drop Value report for the day of tender shall serve as the source of information 

for calculating the condemned liver factor used in carcass-graded deliveries. The condemned liver 

factor shall equal the reported liver value (in $/cwt.) multiplied by -0.01. 

In addition, quality grade, yield grade and carcass weight adjustments will make use of factors 

calculated from values reported by USDA (in $/cwt.) in the 5-Area Weekly Weighted Average Direct 

Slaughter Cattle – Premiums and Discounts report. The Prime, Standard, Yield Grade 1, Yield Grade 2, 

Yield Grade 4, Yield Grade 5, 400-500 lbs., 500-550 lbs, 550-600 lbs., 900-1000 lbs., 1000-1050 lbs. 

and over 1050 lbs. factors are calculated by multiplying the reported weighted average for the 

corresponding category by 0.0063. If a quality grade or yield grade is broken into subcategories on this 

report, then the factor for that quality or yield grade shall be the simple average of all reported averages 

for the subcategories in that category multiplied by 0.0063. The most recently issued report with respect 

to the day a Certificate is tendered shall be used to calculate the factors for that delivery unit. When a 

Certificate is tendered on the same day that a new report is issued that new report shall be used in 

factor calculation regardless of the time of day that the report is released. 

The sub-Standard factor shall equal -25% of the tender day settlement price. 

Should the USDA determine that an error exists in any of the reports used to calculate adjustment 

factors and subsequently issues a corrected report, that corrected report shall be used in place of the 

original. 

10103.B. Live Graded Deliveries 

1. Delivery Days 

Delivery may be made on any Business Day of the contract month, and the first eleven Business Days 

in the succeeding calendar month, provided a Certificate has been tendered as prescribed in Rule 

10104.A., except that live graded deliveries may not be made prior to the ninth Business Day following

the first Friday of the contract month and may not be made on Christmas Eve nor made on New Year’s 

Eve. 

2. Seller's Duties 

On the day of delivery, the seller shall promptly furnish the buyer a USDA Livestock Acceptance 

Certificate which shall include pen number, number of head, net weight of cattle, quality grade, 

estimated average hot yield, and estimated yield grade. 

Delivering sellers must comply with all federal and Exchange policies concerning any affidavit that may 

be required for delivery of cattle.
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Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been given an approved estrus-suppressing progestin additive. This affidavit is to be considered 

part of the Certificate of Delivery and must accompany the Certificate at all times.

Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been administered an approved open heifer protocol. This affidavit is to be considered part of the 

Certificate of Delivery and must accompany the Certificate at all times.

3. Payment 

Upon the seller's fulfillment of the delivery in accordance with all conditions of the contract herein set 

forth, the Clearing House shall release the retained funds to the seller. Title to each delivered unit shall 

pass to the buyer when the delivered unit is placed in the buyer's holding pen. 

4. Par Delivery and Substitutions 

a. Par Delivery Unit. A par delivery unit is 40,000 pounds of USDA estimated Yield Grade 3, 55% 

Choice, 45% Select quality grade live steers or live heifers, with no individual animal weighing less than 

1,050 pounds or more than 1,500 pounds and no individual heifer weighing less than 1,050 pounds or 

more than 1,350 pounds. A delivery unit must consist entirely of steers or entirely of heifers. 

Par delivery units shall have an estimated average hot yield of 63%. 

All cattle contained in a delivery unit shall be healthy. No cattle which are unmerchantable, such as 

crippled, sick, obviously damaged or bruised, or which for any reason do not appear to be in satisfactory 

condition to withstand shipment by truck shall be deliverable. No cattle showing a predominance of 

dairy breeding or showing a prominent hump on the forepart of the body shall be deliverable. Animals 

deemed to be heiferettes, cows or bred heifers shall not be deliverable. Such determinations shall be 

made by the grader and shall be binding on all parties. 

b. Weight Deviations. Steers weighing less than 1,050 pounds or more than 1,550 pounds shall not be 

deliverable. Steers weighing more than 1,500 pounds but less than or equal to 1,550 pounds shall be 

deliverable at an adjustment equal to the 900-1000 lbs. factor described in Rule 10103.A., multiplied by 

the average live weight of the delivery unit. Heifers weighing less than 1,050 pounds or more than 1,350 

pounds shall not be deliverable. The judgment of the grader as to the number of such overweight or 

underweight cattle in the delivery unit shall be final and shall be so certified on the grading certificate. 

c. Yield Deviations. Delivery units with an estimated average hot yield over or under 63% shall be 

deliverable with an adjustment computed by dividing the estimated hot yield by 63% (the par hot yield), 

subtracting 1, multiplying the result by the settlement price, and then multiplying by the total live weight 

of the delivery unit. Units with an estimated average hot yield of less than 60% shall not be deliverable

d. Yield Grade Deviations. Animals with an estimated yield grade of 3 are deliverable at par. Each 

animal with an estimated yield grade of 1, 2, 4 or 5 shall receive a per pound adjustment equal to the 

corresponding factors described in Rule 10103.A. Per animal yield grade adjustments shall be 

calculated by multiplying the per pound adjustment by the average live weight of the delivery unit. 

e. Quality Grade Deviations. Delivery units composed of 55% USDA Choice grade steers or heifers and 

45% USDA Select grade steers or heifers are deliverable at par.

All animals in a delivery unit shall receive a quality grade adjustment computed from the factors 

described in Rule 10103.A. The Live Equivalent Choice-Select Spread (LECSS) and other factors are 

defined in Rule 10103.A. Per pound quality grade adjustments shall be as follows: 

USDA Prime: +0.45xLECSS + Prime factor USDA Choice: +0.45 x LECSS USDA Select: -0.55 x 

LECSS USDA Standard: +0.45 x LECSS + Standard factor Below USDA Standard: +0.45 x LECSS + 

Standard factor + sub-Standard factor 

The per animal quality grade adjustment shall be calculated by multiplying the per pound quality grade 

adjustment by the average live weight of the delivery unit. 

f. Quantity Deviations. Variations in quantity of a delivery unit not in excess of 5% of 40,000 pounds 

shall be permitted at the time of delivery, with appropriate adjustment to reflect delivered weight but with 

no further penalty. 
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g. Delivery Points and Allowances. A par delivery of live beef cattle shall be made from approved 

livestock yards in Wray, Colorado; Worthing, South Dakota; Syracuse, Kansas; Tulia, Texas; Columbus, 

Nebraska; Dodge City, Kansas; Amarillo, Texas; North Platte, Nebraska; Ogallala, Nebraska; Pratt, 

Kansas; Texhoma, Oklahoma; and Clovis, New Mexico. A delivery of live beef cattle shall be made at 

approved stockyards in the following territories:

A. Colorado – par delivery shall be made at any approved stockyard in the state of Colorado.

B. Iowa / Minnesota / South Dakota – par delivery shall be made at any approved stockyard in the 

states of Iowa, Minnesota, or South Dakota.

C. Kansas – par delivery shall be made at any approved stockyard in the state of Kansas.

D. Nebraska – par delivery shall be made at any approved stockyard in the state of Nebraska.

E. Texas / Oklahoma / New Mexico – par delivery shall be made at any approved stockyard in the 

states of Texas, Oklahoma, or New Mexico.

h. Payment for Deviations. For the purpose of computing adjustments resulting from deviations from the 

par delivery unit the settlement price at the time the Certificate is tendered by the clearing member 

representing the seller will be used. 

5. Procedures and Standards for Grading, Estimating Yield and Weighing 

a. Time for Grading. To be eligible for delivery, cattle must be confined in a secured pen at an approved 

livestock yard prior to 9:00 a.m. local time on the day of delivery. Grading and weighing shall be done 

on the day of delivery unless more deliveries are indicated than can be conveniently graded and 

weighed on the intended delivery day. In such case the President may allow grading and weighing after 

2:00 p.m. local time on the day preceding delivery. The buyer must be notified within an hour after the 

cattle are in his holding pen that the delivery intended for him for the following day has been graded, 

weighed and sealed in his holding pen. 

b. Grading and Estimating Yield. Seller shall deliver his cattle to a livestock yard approved by the 

Exchange and surrender the cattle for Exchange delivery by consigning the lot to a duly licensed, 

registered and bonded livestock commission firm. The cattle shall be identified in a manner satisfactory 

to the USDA grader and placed in holding pens. 

If, on preliminary examination, the lot of cattle appears to be healthy, merchantable and in good 

condition, the USDA grader shall grade the cattle, estimate the average hot yield (dressing percentage) 

and estimate the yield grade, and shall record same on the USDA Livestock Acceptance Certificate 

along with the weights taken by the approved livestock yards company. Graders shall also record on the 

grading certificate the number of head and the pen number of the holding pen which has been sealed 

pending delivery to the buyer. 

c. Weighing. Weighing shall be done within one hour following the completion of grading. The cattle 

must stand without feed but shall receive water during the interval between 9:00 a.m. and grading. 

However, in no event shall the cattle receive feed or water during the interval between grading and 

weighing. 

Weighing shall be done by the approved livestock yards company on officially approved scales and 

recorded on the official scale ticket or official weight sheets which shall show total net weight and 

number of head of cattle, lot number and/or pen number and the date weighed. After grading and 

weighing, the cattle shall be sealed in a holding pen. 

6. Delivery Invoice 

After grading and weighing, the USDA shall notify the Exchange of the results, from which the 

Exchange shall promptly prepare its Delivery Invoice incorporating the pen number, number of head, 

net weight, quality grade, estimated average hot yield, estimated yield grade, date of receipt of cattle 

and date of USDA grading. The Delivery Invoice shall be promptly delivered to the buyer and seller. 

Upon receipt, the USDA Livestock Acceptance Certificate shall be forwarded to the clearing member 

representing the buyer. 

7. Cost of Grading and Weighing 

All yardage costs, including driving of livestock, feeding, bedding, weighing, insurance and any other 

required services up to and including weighing shall be borne by the seller in accordance with the 
6

published rates as set forth in the tariff of the livestock yard. The seller shall also bear the costs of 

grading and documentation, which will be established annually by the Exchange. 

Any charges accruing after delivery by seller to the buyer's holding pen shall be borne by the buyer. 

8. Penalties 

If, in the opinion of the USDA grader, the seller fails to present a load of steers, or fails to present steers 

which have been properly sorted prior to arrival at the delivery point stockyards and are suitable for 

delivery on the date at the place specified in the Certificate of Delivery, the seller shall be penalized 

$.015 per pound each Business Day, payable to the Exchange, until proper delivery is made.

If, in the opinion of the USDA grader, the seller fails to present a load of heifers, or fails to present 

heifers which have been properly sorted prior to arrival at the delivery point stockyards and are suitable 

for delivery on the date at the place specified in the Certificate of Delivery, the seller shall be penalized 

$.025 per pound each Business Day, payable to the Exchange, until proper delivery is made.

If, in the opinion of the USDA grader, the buyer or his agent delay, disrupt, or otherwise interfere with 

the delivery process in any manner, the buyer shall be penalized $.015 per pound on each delivery unit 

delivered to the buyer, payable to the Exchange. 

In these and all other delivery matters, the determination of the USDA grader shall be final and binding 

on all parties. 

9. Exchange Certificate 

The rules of the Exchange in regard to the Exchange Inspection Certificate are not applicable to 

delivery under this Chapter. 

10103.C. Carcass Graded Deliveries 

1. Conditions 

A buyer assigned a Certificate of Delivery may call for delivery of the cattle to an approved slaughter 

plant corresponding to the stockyards designated in the Certificate, or to any other approved slaughter 

plant within 200 miles of the feedlot from which the cattle originate. For the purposes of Chapter 101, a 

feedlot shall be defined as any location where cattle are confined to a pen and provided access to feed 

and water including, but not limited to, commercial feeding operations, farmer feeding operations and 

stockyards. 

Final grading will reflect actual carcass results. If the buyer elects carcass grading, slaughter shall not 

occur prior to the third Business Day following the buyer’s notification of the CME Clearing House. The 

Clearing House must be notified by 10:00 a.m. on the third Business Day prior to the day of slaughter of 

the buyer's election of carcass grading, the approved slaughter plant and slaughter day, and whether 

the buyer consents to a Large Lot Delivery Unit if elected by the seller under Rule 10103.C.5.f. 

Upon arrival at the slaughter plant, cattle must be allowed access to water. 

2. Delivery Days 

Delivery may be made on any Business Day of the contract month on which the approved slaughter 

plant selected by the buyer is in operation, and on the first eleven Business Days in the succeeding 

calendar month, provided a Certificate has been tendered as prescribed in Rule 10104.A., and provided 

proper notification has been given to the Clearing House as prescribed in Rule 10103.C.1., except that 

carcass graded deliveries may not be made prior to the fifth Business Day following the first Friday of 

the contract month.

3. Seller's Duties 

On the third Business Day prior to the day of slaughter, the Clearing House will notify the seller of the 

buyer's election of carcass grading, the approved slaughter plant selected by the buyer, the day of 

slaughter selected by the buyer and representatives of the approved slaughter plant, and whether the 

buyer consents to a Large Lot Delivery Unit if elected by the seller under Rule 10103.C.5.f. The seller 

shall be responsible for contacting representatives of the slaughter plant to coordinate arrival time and 

time of slaughter. The cattle shall be scheduled to arrive between 6:00 a.m. and 6:00 p.m. local time on 

the day of slaughter. The seller shall be responsible for transportation to the slaughter plant. The seller 
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shall notify the Clearing House of the agreed upon arrival time by 3:00 p.m. on the second Business 

Day prior to slaughter. 

Delivering sellers must comply with all federal or Exchange policies concerning any affidavit that may be 

required for delivery of cattle. 

Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been given an approved estrus-suppressing progestin additive. This affidavit is to be considered 

part of the Certificate of Delivery and must accompany the Certificate at all times.

Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been administered an approved open heifer protocol. This affidavit is to be considered part of the 

Certificate of Delivery and must accompany the Certificate at all times.

4. Payment 

Upon the seller's fulfillment of delivery to the slaughter plant selected by the buyer and Clearing House 

receipt of visual grading results, the Clearing House shall release 90% of the funds to the seller. 

Remaining funds will be released to the seller upon the completion of final carcass grade and yield 

results. Title to each delivered unit shall pass to the buyer when the delivered unit is weighed and 

placed in a holding pen for slaughter at the approved slaughter plant selected by the buyer. 

5. Par Delivery and Substitutions. 

a. Par Delivery Unit. A par delivery unit, shipped to an approved slaughter plant designated by the 

buyer, shall be 40,000 pounds of live steers or live heifers which produce Yield Grade 3, 55% Choice, 

45% Select grade carcass beef, with no individual carcass weighing less than 600 pounds or more than 

900 pounds. A delivery unit must consist entirely of steers or entirely of heifers.

Par delivery units shall have an actual average hot yield of 63%. 

All cattle contained in a delivery unit shall be healthy. Cattle which are unmerchantable, such as 

crippled, sick, obviously damaged or bruised, or which for any reason do not appear to be in satisfactory 

condition to enter normal fresh meat marketing channels shall be excluded. No cattle showing a 

predominance of dairy breeding or showing a prominent hump on the forepart of the body shall be 

deliverable. 

For carcass graded deliveries only, a “prominent hump on the forepart of the body” shall be defined as a 

hump on a live animal which, when measured on the resulting carcass, is expected to exceed 2 inches 

in height when measured from a line formed by the extension of the top line (including the fat) and 

measuring the lean muscle (excluding the fat) perpendicular to that line in the center of the hump. Any 

animal(s) with a hump estimated to exceed 2 inches when measured in this manner shall be excluded 

from the delivery unit. If the delivered live weight falls below the 5% tolerance as specified in Rule 

10103.C.5.f, the seller is responsible for replacing the removed animal(s) until the minimum live weight 

is achieved. 

Such determinations shall be made by USDA personnel and shall be binding on all parties. All resulting 

carcasses must be merchantable. Carcasses which are not suitable to enter normal fresh meat 

marketing channels will be excluded from the delivery unit. 

b. Weight Deviations. Resulting carcasses weighing less than 500 pounds shall be deliverable at a per 

pound adjustment equal to the 400-500 lbs factor described in Section 10103.A. Resulting carcasses 

weighing 500 pounds but less than 550 pounds shall be deliverable at a per pound adjustment equal to 

the 500-550 lbs factor described in Section 10103.A. Resulting carcasses weighing more than or equal 

to 550 pounds but less than 600 pounds shall be deliverable at a per pound adjustment equal to the 

550-600 lbs. factor described in Section 10103.A. Resulting carcasses weighing more than 900 pounds 

but less than or equal to 1000 pounds shall be deliverable at a per pound adjustment equal to the 900-

1000 lbs. factor described in Section 10103.A. Resulting carcasses weighing more than 1000 pounds 

but less than or equal to 1050 pounds shall be deliverable at a per pound adjustment equal to the 

1000-1050 lbs. factor described in Section 10103.A. Resulting carcasses weighing more than 1050 

pounds shall be deliverable at a per pound adjustment equal to the over 1050 lbs factor described in

Section 10103.A. The per animal carcass weight adjustment shall equal the per pound adjustment 

multiplied by the average live weight of the delivery unit. 
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c. Yield Deviations. Delivery units with an actual average hot yield over or under 63% shall be 

deliverable with an adjustment computed by dividing the actual hot yield by 63% (the par hot yield), 

subtracting 1, multiplying the result by the settlement price, and then multiplying by the total live weight 

of the delivery unit. 

d. Yield Grade Deviations. Yield grade 3 carcasses are deliverable at par. Each carcass with a yield 

grade of 1, 2, 4 or 5 shall receive a per pound adjustment equal to the corresponding factor described in 

Rule 10103.A. Per animal yield grade adjustments shall be calculated by multiplying the per pound 

adjustment by the average live weight of the delivery unit. 

e. Quality Grade Deviations. Delivery units resulting in 55% USDA Choice grade carcasses and 45% 

USDA Select grade carcasses are deliverable at par. All gradeable carcasses in a delivery unit shall 

receive a quality grade adjustment computed from the factors described in Rule 10103.A. The Live 

Equivalent Choice-Select Spread (LECSS) and other factors are defined in Rule 10103.A. Per pound 

quality grade adjustments shall be as follows: 

USDA Prime: +0.45 x LECSS + Prime factor USDA Choice: +0.45 x LECSS USDA Select: -0.55 x 

LECSS USDA Standard: +0.45 x LECSS + Standard factor Below USDA Standard: +0.45 x LECSS + 

Standard factor + sub-Standard factor.

Carcasses with hardbone or dark cutter characteristics shall be deliverable at per pound adjustments in 

accordance with USDA grading procedures and equal to the quality grade factors described in Section 

10103.A.

Carcasses deemed ungradeable with respect to quality grade by the USDA shall receive a per pound 

quality grade discount equal to 25% of the settlement price. The per animal quality grade adjustment 

shall be calculated by multiplying the per pound quality grade adjustment by the average live weight of 

the delivery unit. 

f. Quantity Deviations. Variations in quantity of a delivery unit not in excess of 5% of 40,000 pounds of 

live weight at the approved slaughter plant shall be permitted at the time of delivery, with appropriate 

adjustment to reflect delivered weight but with no further penalty. 

The seller shall be responsible for sorting the cattle into deliverable units prior to arrival at the slaughter 

plant, with each unit weighing between 38,000 pounds and 42,000 pounds and meeting the other 

specifications of the contract, except for Large Lot Delivery Units as described in the following 

paragraph. Any cattle delivered to a slaughter plant in excess of 42,000 pounds, or which do not 

otherwise meet the specifications of the contract, shall not be considered part of the delivery unit, and 

the seller shall be responsible for merchandising those additional and/or undeliverable cattle. 

Delivery cattle from Certificates of Intent that were tendered to the same delivery point on the same 

date by one seller and are subsequently assigned to a single buyer may be grouped together for 

processing at the slaughter plant if both the buyer and seller consent. These Large Lot Delivery Units 

may not exceed a size of ten contracts. The par delivered live weight of Large Lot Delivery Units shall 

be 40,000 pounds times the number of contracts included in the Large Lot Delivery Unit. A 5% variance 

in this par delivered weight shall be allowed without penalty. For Large Lot Delivery Units only, the seller 

shall be relieved of the requirement that cattle be sorted into units weighing between 38,000 and 42,000 

pounds prior to arrival at the slaughter plant. 

g. Other Deviations. If one or more of the carcasses is condemned or is unacceptable for entry into 

normal fresh marketing channels (for reasons such as measles), than each such carcass shall not be 

considered as part of the delivery unit. If a carcass is removed from the delivery unit for reasons stated 

above, the total carcass weight will reflect only those carcasses acceptable for delivery, and the total 

delivered live-weight shall be reduced by the average live weight times the number of carcasses 

removed. In the event that the total live weight falls below the 5% tolerance as specified in Rule 

10103.C.5.f. as a result of the condemnation, for each removed carcass an amount equal to either 1) 

the par value of an animal at the average live weight per head of the delivery unit, or 2) the average 

dollar value of the remaining carcasses in the delivery unit, whichever is greater, shall be credited to the 

buyer. 

Excess trimming required due to injection site abscesses or other carcass defects will reduce the total 

delivered carcass weight, and the resulting hot yield. 
9

Liver condemnations in excess of 20% are the liability of the seller. To determine the maximum number 

of allowable liver condemnations in a par delivery unit, the number of head in the delivery unit shall be 

multiplied by 0.20 and the result rounded to the nearest integer. For each liver in excess of the 

maximum allowable, a discount equal to the condemned liver factor (described in Rule 10103.A.) 

multiplied by the average live weight of the delivery unit shall be applied. 

If, after title to the delivery unit has passed from the seller to the buyer, an animal is condemned or 

otherwise becomes unacceptable for slaughter due to reasons clearly beyond the control of the seller 

(e.g., a broken leg caused by a fall after the pen has been sealed), that animal shall be removed from 

the delivery unit. An amount equal to either 1) the par value of an animal at the average live weight per 

head of the delivery unit, or 2) the average dollar value of the remaining animals in the delivery unit, 

whichever is greater, shall be credited to the seller. 

If, after title to the delivery unit has passed from the seller to the buyer, a carcass is condemned, heavily 

trimmed, or altered in any manner such that the value of the carcass is adversely affected due to 

reasons clearly beyond the control of the seller (e.g., a carcass that falls off the chain or rail and onto 

the floor), that carcass shall be removed from the delivery unit. An amount equal to either 1) the par 

value of an animal at the average live weight per head of the delivery unit, or 2) the average dollar value 

of the remaining carcasses in the delivery unit, whichever is greater, shall be credited to the seller. 

If, after title to the delivery unit has passed from the seller to the buyer, any carcass data required to

perform the delivery calculations cannot be obtained for one or more carcasses due to reasons clearly 

beyond the control of the seller (e.g., the approved slaughter facility fails to hold carcasses for regrade), 

each such carcass shall be deemed Choice when the final quality grading results cannot be obtained; 

Yield Grade 3 when the actual yield grade results cannot be obtained; 63% or the average hot yield of 

the remaining carcasses in the delivery unit, whichever is greater, when the actual hot yield cannot be 

obtained. 

h. Delivery Points and Allowances. Buyers electing carcass grading must specify an approved slaughter 

plant enumerated by the Exchange. Eligible slaughter plants include those enumerated for the 

stockyards to which the cattle were tendered, and any other approved slaughter plant that is within 200 

miles of the originating feedlot. 

i. Payment for Deviations. For the purpose of computing adjustments resulting from deviations from the 

par delivery unit the settlement price at the time the Certificate is tendered by the clearing member 

representing the seller will be used. 

6. Procedures and Standards for Grading, Determining Yield and Weighing 

a. Time for Arrival and Visual Inspection. Cattle shall arrive at the time agreed upon by the seller and 

the approved slaughter plant. Weighing and visual inspection of the cattle by USDA Meat Grading 

Service Personnel to ensure general conformance with the contract shall be done at the time of 

delivery. After completion of weighing and visual inspection, cattle will be placed in a holding pen as a 

unit prior to slaughter. Identity of the delivery unit shall be maintained in a manner satisfactory to the 

USDA Meat Grader, and shall include sealing the holding pen with a numbered seal, and recording the 

seal number and the plant-assigned sequential lot number of the delivery unit. 

b. Grading and Determining Yield. Approved slaughter plants normally grading after one Business Day 

must hold carcasses falling in the top third of any quality grade except Prime for re-grading two 

Business Days after slaughter. Approved slaughter plants normally grading after two Business Days 

may hold carcasses falling in the top third of any quality grade except Prime for re-grading three 

Business Days after slaughter. Final grade and yield results must be completed within three Business 

Days of slaughter. 

c. Weighing. The weight at the slaughter plant will be used as the live delivery weight and for purposes 

of calculating the resulting hot yield. If, in the judgment of the USDA Meat Grader, one or more of the 

animal(s) in the load do not generally conform with the contract specifications, the objectionable 

animal(s) will be removed from the delivery unit. If the delivered live weight falls below the 5% tolerance 

as specified in Rule 10103.C.5.f, the seller is responsible for replacing removed animal(s) until the 

minimum live weight is achieved. 
10

Weighing shall be done promptly upon arrival at the slaughter plant. USDA Meat Grading Service 

Personnel will supervise weighing by slaughter plant employees, and shall record total net weight and 

number of head of cattle, lot number and/or pen number and the date weighed. After weighing, the 

cattle shall be sealed in a holding pen prior to slaughter. 

7. Delivery Notice 

Final grading results must be completed within three Business Days after the day of slaughter. The 

USDA Meat Grader shall notify the Exchange of the results, from which the Exchange shall promptly 

prepare its Delivery Invoice incorporating the lot number, number of head, net live weight, quality grade, 

actual average hot yield, yield grade, date of delivery to the slaughter plant, and date of final USDA 

grading. The Delivery Invoice shall be promptly delivered to the buyer and seller. Upon receipt, the 

USDA Carcass Grading Results Certificate shall be forwarded to the clearing member representing the 

buyer. 

8. Cost of Grading, Weighing, and Transportation 

Death loss, feed and yardage, and all other costs are the responsibility of the seller until the cattle are 

delivered to the slaughter plant selected by the buyer. The buyer will be assessed a standard freight 

rate per mile for each additional mile the cattle are hauled over and above the distance between the 

feedlot and the stockyards to which the seller originally tendered the cattle, and this freight assessment 

will be paid to the seller. The standard freight rate per mile will be established annually by the 

Exchange. The seller shall be responsible for the cost of visual inspection and weighing upon arrival at 

the slaughter plant. Any additional costs of carcass grading shall be borne by the buyer. 

9. Penalties 

If, in the opinion of the USDA Meat Grader, the seller fails to present the required quantity of deliverable 

cattle to the slaughter plant on the date and time specified by the buyer, the seller shall be penalized 

$0.015 per pound each Business Day, payable to the Exchange, until proper delivery is made. 

In these and all other delivery matters, the determination of the USDA Meat Grader shall be final and 

binding on all parties. 

10. Exchange Certificate 

The rules of the Exchange in regard to the Exchange Inspection Certificate are not applicable to 

delivery under this Chapter. 

10103. SETTLEMENT PROCEDURES

(FOR ALL CONTRACT MONTHS COMMENCING WITH OCTOBER 2017 AND BEYOND) 

10103.A. Sources and Calculation of Adjustment Factors 

Quality grade adjustments for all delivery units will make use of the live weight equivalent of the ChoiceSelect boxed beef spread calculated from information reported by USDA (in $/cwt.) for the day of tender 

in the National Daily Boxed Beef Cutout and Boxed Beef Cuts – Negotiated Sales – Afternoon report. 

This is referred to hereafter as the Live Equivalent Choice-Select Spread (LECSS) and is computed by 

subtracting the “Selected Boxed Beef Cut-Out Value” from the “Choice Boxed Beef Cut-Out Value” and 

multiplying that result by 0.0063. 

The USDA By-Product Drop Value report for the day of tender shall serve as the source of information 

for calculating the condemned liver factor used in carcass-graded deliveries. The condemned liver 

factor shall equal the reported liver value (in $/cwt.) multiplied by -0.01. 

In addition, quality grade, yield grade and carcass weight adjustments will make use of factors 

calculated from values reported by USDA (in $/cwt.) in the 5-Area Weekly Weighted Average Direct 

Slaughter Cattle – Premiums and Discounts report. The Prime, Standard, Yield Grade 1, Yield Grade 2, 

Yield Grade 4, Yield Grade 5, 400-500 lbs., 500-550 lbs, 550-600 lbs., 900-1000 lbs., 1000-1050 lbs. 

and over 1050 lbs. factors are calculated by multiplying the reported weighted average for the 

corresponding category by 0.0063. If a quality grade or yield grade is broken into subcategories on this 

report, then the factor for that quality or yield grade shall be the simple average of all reported averages 

for the subcategories in that category multiplied by 0.0063. The most recently issued report with respect 

to the day a Certificate is tendered shall be used to calculate the factors for that delivery unit. When a 
11

Certificate is tendered on the same day that a new report is issued that new report shall be used in 

factor calculation regardless of the time of day that the report is released. 

The sub-Standard factor shall equal -25% of the tender day settlement price. 

Should the USDA determine that an error exists in any of the reports used to calculate adjustment 

factors and subsequently issues a corrected report, that corrected report shall be used in place of the 

original. 

10103.B. Live Graded Deliveries 

1. Delivery Days 

Delivery may be made on any Business Day of the contract month, and the first eleven Business Days 

in the succeeding calendar month, provided a Certificate has been tendered as prescribed in Rule 

10104.A., except that live graded deliveries may not be made prior to the ninth Business Day following

the first Friday of the contract month and may not be made on Christmas Eve nor made on New Year’s 

Eve. 

2. Seller's Duties 

On the day of delivery, the seller shall promptly furnish the buyer a USDA Livestock Acceptance 

Certificate which shall include pen number, number of head, net weight of cattle, quality grade, 

estimated average hot yield, and estimated yield grade. 

Delivering sellers must comply with all federal and Exchange policies concerning any affidavit that may 

be required for delivery of cattle.

Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been given an approved estrus-suppressing progestin additive. This affidavit is to be considered 

part of the Certificate of Delivery and must accompany the Certificate at all times.

Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been administered an approved open heifer protocol. This affidavit is to be considered part of the 

Certificate of Delivery and must accompany the Certificate at all times.

3. Payment 

Upon the seller's fulfillment of the delivery in accordance with all conditions of the contract herein set 

forth, the Clearing House shall release the retained funds to the seller. Title to each delivered unit shall 

pass to the buyer when the delivered unit is placed in the buyer's holding pen. 

4. Par Delivery and Substitutions 

a. Par Delivery Unit. A par delivery unit is 40,000 pounds of USDA estimated Yield Grade 3, 60% 

Choice, 40% Select quality grade live steers or live heifers, with no individual animal weighing less than 

1,050 pounds or more than 1,500 pounds and no individual heifer weighing less than 1,050 pounds or 

more than 1,350 pounds. A delivery unit must consist entirely of steers or entirely of heifers. 

Par delivery units shall have an estimated average hot yield of 63.0%. 

All cattle contained in a delivery unit shall be healthy. No cattle which are unmerchantable, such as 

crippled, sick, obviously damaged or bruised, or which for any reason do not appear to be in satisfactory 

condition to withstand shipment by truck shall be deliverable. No cattle showing a predominance of 

dairy breeding or showing a prominent hump on the forepart of the body shall be deliverable. Animals 

deemed to be heiferettes, cows or bred heifers shall not be deliverable. Such determinations shall be 

made by the grader and shall be binding on all parties. 

b. Weight Deviations. Steers weighing less than 1,050 pounds or more than 1,550 pounds shall not be 

deliverable. Steers weighing more than 1,500 pounds but less than or equal to 1,550 pounds shall be 

deliverable at an adjustment equal to the 900-1000 lbs. factor described in Rule 10103.A., multiplied by 

the average live weight of the delivery unit. Heifers weighing less than 1,050 pounds or more than 1,350 

pounds shall not be deliverable. The judgment of the grader as to the number of such overweight or 

underweight cattle in the delivery unit shall be final and shall be so certified on the grading certificate. 

c. Yield Deviations. Delivery units with an estimated average hot yield over or under 63.0% shall be 

deliverable with an adjustment computed by dividing the estimated hot yield by 63.0% (the par hot 

yield), subtracting 1, multiplying the result by the settlement price, and then multiplying by the total live 
12

weight of the delivery unit. Units with an estimated average hot yield of less than 60% shall not be 

deliverable

d. Yield Grade Deviations. Animals with an estimated yield grade of 3 are deliverable at par. Each 

animal with an estimated yield grade of 1, 2, 4 or 5 shall receive a per pound adjustment equal to the 

corresponding factors described in Rule 10103.A. Per animal yield grade adjustments shall be 

calculated by multiplying the per pound adjustment by the average live weight of the delivery unit. 

e. Quality Grade Deviations. Delivery units composed of 60% USDA Choice grade steers or heifers and 

40% USDA Select grade steers or heifers are deliverable at par.

All animals in a delivery unit shall receive a quality grade adjustment computed from the factors 

described in Rule 10103.A. The Live Equivalent Choice-Select Spread (LECSS) and other factors are 

defined in Rule 10103.A. Per pound quality grade adjustments shall be as follows:

USDA Prime: +0.40 x LECSS + Prime factor; USDA Choice: +0.40 x LECSS; USDA Select: -0.60 x 

LECSS; USDA Standard: +0.40 x LECSS + Standard factor; Below USDA Standard: +0.40 x LECSS + 

Standard factor + sub-Standard factor 

The per animal quality grade adjustment shall be calculated by multiplying the per pound quality grade 

adjustment by the average live weight of the delivery unit. 

f. Quantity Deviations. Variations in quantity of a delivery unit not in excess of 5% of 40,000 pounds 

shall be permitted at the time of delivery, with appropriate adjustment to reflect delivered weight but with 

no further penalty. 

g. Delivery Points and Allowances. A par delivery of live beef cattle shall be made from approved 

livestock yards in Wray, Colorado; Syracuse, Kansas; Tulia, Texas; Columbus, Nebraska; Dodge City, 

Kansas; Amarillo, Texas; North Platte, Nebraska; Ogallala, Nebraska; Pratt, Kansas; Texhoma, 

Oklahoma; and Clovis, New Mexico. Deliveries of live beef cattle shall be made from an approved 

stockyard in Worthing, South Dakota at a discount of $1.50/cwt. during October contract months and at 

par in all other contract months. A delivery of live beef cattle shall be made at approved stockyards in 

the following territories:

A. Colorado – par delivery shall be made at any approved stockyard in the state of Colorado.

B. Iowa / Minnesota / South Dakota – Deliveries of live beef cattle shall be made at a discount of 

$1.50/cwt during October contract months and at par in all other contract months at any 

approved stockyard in the states of Iowa, Minnesota, or South Dakota. 

C. Kansas – par delivery shall be made at any approved stockyard in the state of Kansas.

D. Nebraska – par delivery shall be made at any approved stockyard in the state of Nebraska.

E. Texas / Oklahoma / New Mexico – par delivery shall be made at any approved stockyard in the 

states of Texas, Oklahoma, or New Mexico.

h. Payment for Deviations. For the purpose of computing adjustments resulting from deviations from the 

par delivery unit the settlement price at the time the Certificate is tendered by the clearing member 

representing the seller will be used. 

5. Procedures and Standards for Grading, Estimating Yield and Weighing 

a. Time for Grading. To be eligible for delivery, cattle must be confined in a secured pen at an approved 

livestock yard prior to 9:00 a.m. local time on the day of delivery. Grading and weighing shall be done 

on the day of delivery unless more deliveries are indicated than can be conveniently graded and 

weighed on the intended delivery day. In such case the President may allow grading and weighing after 

2:00 p.m. local time on the day preceding delivery. The buyer must be notified within an hour after the 

cattle are in his holding pen that the delivery intended for him for the following day has been graded, 

weighed and sealed in his holding pen. 

b. Grading and Estimating Yield. Seller shall deliver his cattle to a livestock yard approved by the 

Exchange and surrender the cattle for Exchange delivery by consigning the lot to a duly licensed, 

registered and bonded livestock commission firm. The cattle shall be identified in a manner satisfactory 

to the USDA grader and placed in holding pens. 

If, on preliminary examination, the lot of cattle appears to be healthy, merchantable and in good 

condition, the USDA grader shall grade the cattle, estimate the average hot yield (dressing percentage) 
13

and estimate the yield grade, and shall record same on the USDA Livestock Acceptance Certificate 

along with the weights taken by the approved livestock yards company. Graders shall also record on the 

grading certificate the number of head and the pen number of the holding pen which has been sealed 

pending delivery to the buyer. 

c. Weighing. Weighing shall be done within one hour following the completion of grading. The cattle 

must stand without feed but shall receive water during the interval between 9:00 a.m. and grading. 

However, in no event shall the cattle receive feed or water during the interval between grading and 

weighing. 

Weighing shall be done by the approved livestock yards company on officially approved scales and 

recorded on the official scale ticket or official weight sheets which shall show total net weight and 

number of head of cattle, lot number and/or pen number and the date weighed. After grading and 

weighing, the cattle shall be sealed in a holding pen. 

6. Delivery Invoice 

After grading and weighing, the USDA shall notify the Exchange of the results, from which the 

Exchange shall promptly prepare its Delivery Invoice incorporating the pen number, number of head, 

net weight, quality grade, estimated average hot yield, estimated yield grade, date of receipt of cattle 

and date of USDA grading. The Delivery Invoice shall be promptly delivered to the buyer and seller. 

Upon receipt, the USDA Livestock Acceptance Certificate shall be forwarded to the clearing member 

representing the buyer. 

7. Cost of Grading and Weighing 

All yardage costs, including driving of livestock, feeding, bedding, weighing, insurance and any other 

required services up to and including weighing shall be borne by the seller in accordance with the 

published rates as set forth in the tariff of the livestock yard. The seller shall also bear the costs of 

grading and documentation, which will be established annually by the Exchange. 

Any charges accruing after delivery by seller to the buyer's holding pen shall be borne by the buyer. 

8. Penalties 

If, in the opinion of the USDA grader, the seller fails to present a load of steers, or fails to present steers 

which have been properly sorted prior to arrival at the delivery point stockyards and are suitable for 

delivery on the date at the place specified in the Certificate of Delivery, the seller shall be penalized 

$.015 per pound each Business Day, payable to the Exchange, until proper delivery is made.

If, in the opinion of the USDA grader, the seller fails to present a load of heifers, or fails to present 

heifers which have been properly sorted prior to arrival at the delivery point stockyards and are suitable 

for delivery on the date at the place specified in the Certificate of Delivery, the seller shall be penalized 

$.025 per pound each Business Day, payable to the Exchange, until proper delivery is made.

If, in the opinion of the USDA grader, the buyer or his agent delay, disrupt, or otherwise interfere with 

the delivery process in any manner, the buyer shall be penalized $.015 per pound on each delivery unit 

delivered to the buyer, payable to the Exchange. 

In these and all other delivery matters, the determination of the USDA grader shall be final and binding 

on all parties. 

9. Exchange Certificate 

The rules of the Exchange in regard to the Exchange Inspection Certificate are not applicable to 

delivery under this Chapter. 

10103.C. Carcass Graded Deliveries 

1. Conditions 

A buyer assigned a Certificate of Delivery may call for delivery of the cattle to an approved slaughter 

plant corresponding to the stockyards designated in the Certificate, or to any other approved slaughter 

plant within 200 miles of the feedlot from which the cattle originate. For the purposes of Chapter 101, a 

feedlot shall be defined as any location where cattle are confined to a pen and provided access to feed 

and water including, but not limited to, commercial feeding operations, farmer feeding operations and 

stockyards. 
14

Final grading will reflect actual carcass results. If the buyer elects carcass grading, slaughter shall not 

occur prior to the third Business Day following the buyer’s notification of the CME Clearing House. The 

Clearing House must be notified by 10:00 a.m. on the third Business Day prior to the day of slaughter of 

the buyer's election of carcass grading, the approved slaughter plant and slaughter day, and whether 

the buyer consents to a Large Lot Delivery Unit if elected by the seller under Rule 10103.C.5.f. 

Upon arrival at the slaughter plant, cattle must be allowed access to water. 

2. Delivery Days 

Delivery may be made on any Business Day of the contract month on which the approved slaughter 

plant selected by the buyer is in operation, and on the first eleven Business Days in the succeeding 

calendar month, provided a Certificate has been tendered as prescribed in Rule 10104.A., and provided 

proper notification has been given to the Clearing House as prescribed in Rule 10103.C.1., except that 

carcass graded deliveries may not be made prior to the fifth Business Day following the first Friday of 

the contract month.

3. Seller's Duties 

On the third Business Day prior to the day of slaughter, the Clearing House will notify the seller of the 

buyer's election of carcass grading, the approved slaughter plant selected by the buyer, the day of 

slaughter selected by the buyer and representatives of the approved slaughter plant, and whether the 

buyer consents to a Large Lot Delivery Unit if elected by the seller under Rule 10103.C.5.f. The seller 

shall be responsible for contacting representatives of the slaughter plant to coordinate arrival time and 

time of slaughter. The cattle shall be scheduled to arrive between 6:00 a.m. and 6:00 p.m. local time on 

the day of slaughter. The seller shall be responsible for transportation to the slaughter plant. The seller 

shall notify the Clearing House of the agreed upon arrival time by 3:00 p.m. on the second Business 

Day prior to slaughter. 

Delivering sellers must comply with all federal or Exchange policies concerning any affidavit that may be 

required for delivery of cattle. 

Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been given an approved estrus-suppressing progestin additive. This affidavit is to be considered

part of the Certificate of Delivery and must accompany the Certificate at all times.

Delivery of heifers requires delivering sellers to sign an Exchange affidavit attesting that the heifers 

have been administered an approved open heifer protocol. This affidavit is to be considered part of the 

Certificate of Delivery and must accompany the Certificate at all times.

4. Payment 

Upon the seller's fulfillment of delivery to the slaughter plant selected by the buyer and Clearing House 

receipt of visual grading results, the Clearing House shall release 90% of the funds to the seller. 

Remaining funds will be released to the seller upon the completion of final carcass grade and yield 

results. Title to each delivered unit shall pass to the buyer when the delivered unit is weighed and 

placed in a holding pen for slaughter at the approved slaughter plant selected by the buyer. 

5. Par Delivery and Substitutions. 

a. Par Delivery Unit. A par delivery unit, shipped to an approved slaughter plant designated by the 

buyer, shall be 40,000 pounds of live steers or live heifers which produce Yield Grade 3, 60% Choice, 

40% Select grade carcass beef, with no individual carcass weighing less than 600 pounds or more than 

900 pounds. A delivery unit must consist entirely of steers or entirely of heifers.

Par delivery units shall have an actual average hot yield of 63.0%. 

All cattle contained in a delivery unit shall be healthy. Cattle which are unmerchantable, such as 

crippled, sick, obviously damaged or bruised, or which for any reason do not appear to be in satisfactory 

condition to enter normal fresh meat marketing channels shall be excluded. No cattle showing a 

predominance of dairy breeding or showing a prominent hump on the forepart of the body shall be 

deliverable. 

For carcass graded deliveries only, a “prominent hump on the forepart of the body” shall be defined as a 

hump on a live animal which, when measured on the resulting carcass, is expected to exceed 2 inches 

in height when measured from a line formed by the extension of the top line (including the fat) and 
15

measuring the lean muscle (excluding the fat) perpendicular to that line in the center of the hump. Any 

animal(s) with a hump estimated to exceed 2 inches when measured in this manner shall be excluded 

from the delivery unit. If the delivered live weight falls below the 5% tolerance as specified in Rule 

10103.C.5.f, the seller is responsible for replacing the removed animal(s) until the minimum live weight 

is achieved. 

Such determinations shall be made by USDA personnel and shall be binding on all parties. All resulting 

carcasses must be merchantable. Carcasses which are not suitable to enter normal fresh meat 

marketing channels will be excluded from the delivery unit. 

b. Weight Deviations. Resulting carcasses weighing less than 500 pounds shall be deliverable at a per 

pound adjustment equal to the 400-500 lbs factor described in Section 10103.A. Resulting carcasses 

weighing 500 pounds but less than 550 pounds shall be deliverable at a per pound adjustment equal to 

the 500-550 lbs factor described in Section 10103.A. Resulting carcasses weighing more than or equal 

to 550 pounds but less than 600 pounds shall be deliverable at a per pound adjustment equal to the 

550-600 lbs. factor described in Section 10103.A. Resulting carcasses weighing more than 900 pounds 

but less than or equal to 1000 pounds shall be deliverable at a per pound adjustment equal to the 900-

1000 lbs. factor described in Section 10103.A. Resulting carcasses weighing more than 1000 pounds 

but less than or equal to 1050 pounds shall be deliverable at a per pound adjustment equal to the 

1000-1050 lbs. factor described in Section 10103.A. Resulting carcasses weighing more than 1050 

pounds shall be deliverable at a per pound adjustment equal to the over 1050 lbs factor described in 

Section 10103.A. The per animal carcass weight adjustment shall equal the per pound adjustment 

multiplied by the average live weight of the delivery unit. 

c. Yield Deviations. Delivery units with an actual average hot yield over or under 63.0% shall be 

deliverable with an adjustment computed by dividing the actual hot yield by 63.0% (the par hot yield), 

subtracting 1, multiplying the result by the settlement price, and then multiplying by the total live weight 

of the delivery unit. 

d. Yield Grade Deviations. Yield grade 3 carcasses are deliverable at par. Each carcass with a yield 

grade of 1, 2, 4 or 5 shall receive a per pound adjustment equal to the corresponding factor described in 

Rule 10103.A. Per animal yield grade adjustments shall be calculated by multiplying the per pound 

adjustment by the average live weight of the delivery unit. 

e. Quality Grade Deviations. Delivery units resulting in 60% USDA Choice grade carcasses and 40% 

USDA Select grade carcasses are deliverable at par. All gradeable carcasses in a delivery unit shall 

receive a quality grade adjustment computed from the factors described in Rule 10103.A. The Live 

Equivalent Choice-Select Spread (LECSS) and other factors are defined in Rule 10103.A. Per pound 

quality grade adjustments shall be as follows: 

USDA Prime: +0.40 x LECSS + Prime factor; USDA Choice: +0.40 x LECSS USDA Select: -0.60 x 

LECSS USDA Standard: +0.40 x LECSS + Standard factor Below USDA Standard: +0.40 x LECSS + 

Standard factor + sub-Standard factor.

Carcasses with hardbone or dark cutter characteristics shall be deliverable at per pound adjustments in 

accordance with USDA grading procedures and equal to the quality grade factors described in Section 

10103.A.

Carcasses deemed ungradeable with respect to quality grade by the USDA shall receive a per pound 

quality grade discount equal to 25% of the settlement price. The per animal quality grade adjustment 

shall be calculated by multiplying the per pound quality grade adjustment by the average live weight of 

the delivery unit. 

f. Quantity Deviations. Variations in quantity of a delivery unit not in excess of 5% of 40,000 pounds of 

live weight at the approved slaughter plant shall be permitted at the time of delivery, with appropriate 

adjustment to reflect delivered weight but with no further penalty. 

The seller shall be responsible for sorting the cattle into deliverable units prior to arrival at the slaughter 

plant, with each unit weighing between 38,000 pounds and 42,000 pounds and meeting the other 

specifications of the contract, except for Large Lot Delivery Units as described in the following 

paragraph. Any cattle delivered to a slaughter plant in excess of 42,000 pounds, or which do not 
16

otherwise meet the specifications of the contract, shall not be considered part of the delivery unit, and 

the seller shall be responsible for merchandising those additional and/or undeliverable cattle. 

Delivery cattle from Certificates of Intent that were tendered to the same delivery point on the same 

date by one seller and are subsequently assigned to a single buyer may be grouped together for 

processing at the slaughter plant if both the buyer and seller consent. These Large Lot Delivery Units 

may not exceed a size of ten contracts. The par delivered live weight of Large Lot Delivery Units shall 

be 40,000 pounds times the number of contracts included in the Large Lot Delivery Unit. A 5% variance 

in this par delivered weight shall be allowed without penalty. For Large Lot Delivery Units only, the seller 

shall be relieved of the requirement that cattle be sorted into units weighing between 38,000 and 42,000 

pounds prior to arrival at the slaughter plant. 

g. Other Deviations. If one or more of the carcasses is condemned or is unacceptable for entry into 

normal fresh marketing channels (for reasons such as measles), than each such carcass shall not be 

considered as part of the delivery unit. If a carcass is removed from the delivery unit for reasons stated 

above, the total carcass weight will reflect only those carcasses acceptable for delivery, and the total 

delivered live-weight shall be reduced by the average live weight times the number of carcasses 

removed. In the event that the total live weight falls below the 5% tolerance as specified in Rule 

10103.C.5.f. as a result of the condemnation, for each removed carcass an amount equal to either 1) 

the par value of an animal at the average live weight per head of the delivery unit, or 2) the average 

dollar value of the remaining carcasses in the delivery unit, whichever is greater, shall be credited to the 

buyer. 

Excess trimming required due to injection site abscesses or other carcass defects will reduce the total 

delivered carcass weight, and the resulting hot yield. 

Liver condemnations in excess of 20% are the liability of the seller. To determine the maximum number 

of allowable liver condemnations in a par delivery unit, the number of head in the delivery unit shall be 

multiplied by 0.20 and the result rounded to the nearest integer. For each liver in excess of the 

maximum allowable, a discount equal to the condemned liver factor (described in Rule 10103.A.) 

multiplied by the average live weight of the delivery unit shall be applied. 

If, after title to the delivery unit has passed from the seller to the buyer, an animal is condemned or 

otherwise becomes unacceptable for slaughter due to reasons clearly beyond the control of the seller 

(e.g., a broken leg caused by a fall after the pen has been sealed), that animal shall be removed from 

the delivery unit. An amount equal to either 1) the par value of an animal at the average live weight per 

head of the delivery unit, or 2) the average dollar value of the remaining animals in the delivery unit, 

whichever is greater, shall be credited to the seller. 

If, after title to the delivery unit has passed from the seller to the buyer, a carcass is condemned, heavily 

trimmed, or altered in any manner such that the value of the carcass is adversely affected due to 

reasons clearly beyond the control of the seller (e.g., a carcass that falls off the chain or rail and onto 

the floor), that carcass shall be removed from the delivery unit. An amount equal to either 1) the par 

value of an animal at the average live weight per head of the delivery unit, or 2) the average dollar value 

of the remaining carcasses in the delivery unit, whichever is greater, shall be credited to the seller. 

If, after title to the delivery unit has passed from the seller to the buyer, any carcass data required to 

perform the delivery calculations cannot be obtained for one or more carcasses due to reasons clearly 

beyond the control of the seller (e.g., the approved slaughter facility fails to hold carcasses for regrade), 

each such carcass shall be deemed Choice when the final quality grading results cannot be obtained; 

Yield Grade 3 when the actual yield grade results cannot be obtained; 63.0% or the average hot yield of 

the remaining carcasses in the delivery unit, whichever is greater, when the actual hot yield cannot be 

obtained. 

h. Delivery Points and Allowances. Buyers electing carcass grading must specify an approved slaughter 

plant enumerated by the Exchange. Eligible slaughter plants include those enumerated for the 

stockyards to which the cattle were tendered, and any other approved slaughter plant that is within 200 

miles of the originating feedlot. A par delivery of carcass graded beef cattle shall have originally been 

tendered to approved livestock yards in Wray, Colorado; Syracuse, Kansas; Tulia, Texas; Columbus, 

Nebraska; Dodge City, Kansas; Amarillo, Texas; North Platte, Nebraska; Ogallala, Nebraska; Pratt, 
17

Kansas; Texhoma, Oklahoma; and Clovis, New Mexico. Deliveries of carcass graded beef cattle 

originally tendered to an approved stockyard in Worthing, South Dakota shall be at a discount of 

$1.50/cwt. during October contract months and shall be delivered at par in all other contract months. A 

delivery of carcass graded beef cattle shall have originally been tendered to an approved stockyard in 

the following territories:

A. Colorado – par delivery of carcass graded beef cattle may have originally been tendered to 

any approved stockyard in the state of Colorado.

B. Iowa / Minnesota / South Dakota – delivery of carcass graded beef cattle at a discount of 

$1.50/cwt during October contract months and at par in all other contract months may have 

originally been tendered to any approved stockyard in the states of Iowa, Minnesota, or South 

Dakota. 

C. Kansas – par delivery of carcass graded beef cattle may have originally been tendered to any 

approved stockyard in the state of Kansas.

D. Nebraska – par delivery of carcass graded beef cattle may have originally been tendered to 

any approved stockyard in the state of Nebraska.

E. Texas / Oklahoma / New Mexico – par delivery of carcass graded beef cattle may have 

originally been tendered to any approved stockyard in the states of Texas, Oklahoma, or New 

Mexico.

i. Payment for Deviations. For the purpose of computing adjustments resulting from deviations from the 

par delivery unit the settlement price at the time the Certificate is tendered by the clearing member 

representing the seller will be used. 

6. Procedures and Standards for Grading, Determining Yield and Weighing 

a. Time for Arrival and Visual Inspection. Cattle shall arrive at the time agreed upon by the seller and 

the approved slaughter plant. Weighing and visual inspection of the cattle by USDA Meat Grading 

Service Personnel to ensure general conformance with the contract shall be done at the time of 

delivery. After completion of weighing and visual inspection, cattle will be placed in a holding pen as a 

unit prior to slaughter. Identity of the delivery unit shall be maintained in a manner satisfactory to the 

USDA Meat Grader, and shall include sealing the holding pen with a numbered seal, and recording the 

seal number and the plant-assigned sequential lot number of the delivery unit. 

b. Grading and Determining Yield. Approved slaughter plants normally grading after one Business Day 

must hold carcasses falling in the top third of any quality grade except Prime for re-grading two 

Business Days after slaughter. Approved slaughter plants normally grading after two Business Days 

may hold carcasses falling in the top third of any quality grade except Prime for re-grading three 

Business Days after slaughter. Final grade and yield results must be completed within three Business 

Days of slaughter. 

c. Weighing. The weight at the slaughter plant will be used as the live delivery weight and for purposes 

of calculating the resulting hot yield. If, in the judgment of the USDA Meat Grader, one or more of the 

animal(s) in the load do not generally conform with the contract specifications, the objectionable 

animal(s) will be removed from the delivery unit. If the delivered live weight falls below the 5% tolerance 

as specified in Rule 10103.C.5.f, the seller is responsible for replacing removed animal(s) until the 

minimum live weight is achieved. 

Weighing shall be done promptly upon arrival at the slaughter plant. USDA Meat Grading Service 

Personnel will supervise weighing by slaughter plant employees, and shall record total net weight and 

number of head of cattle, lot number and/or pen number and the date weighed. After weighing, the 

cattle shall be sealed in a holding pen prior to slaughter. 

7. Delivery Notice 

Final grading results must be completed within three Business Days after the day of slaughter. The 

USDA Meat Grader shall notify the Exchange of the results, from which the Exchange shall promptly 

prepare its Delivery Invoice incorporating the lot number, number of head, net live weight, quality grade, 

actual average hot yield, yield grade, date of delivery to the slaughter plant, and date of final USDA 

grading. The Delivery Invoice shall be promptly delivered to the buyer and seller. Upon receipt, the 
18

USDA Carcass Grading Results Certificate shall be forwarded to the clearing member representing the 

buyer. 

8. Cost of Grading, Weighing, and Transportation 

Death loss, feed and yardage, and all other costs are the responsibility of the seller until the cattle are 

delivered to the slaughter plant selected by the buyer. The buyer will be assessed a standard freight 

rate per mile for each additional mile the cattle are hauled over and above the distance between the 

feedlot and the stockyards to which the seller originally tendered the cattle, and this freight assessment 

will be paid to the seller. The standard freight rate per mile will be established annually by the 

Exchange. The seller shall be responsible for the cost of visual inspection and weighing upon arrival at 

the slaughter plant. Any additional costs of carcass grading shall be borne by the buyer.

9. Penalties 

If, in the opinion of the USDA Meat Grader, the seller fails to present the required quantity of deliverable 

cattle to the slaughter plant on the date and time specified by the buyer, the seller shall be penalized 

$0.015 per pound each Business Day, payable to the Exchange, until proper delivery is made. 

In these and all other delivery matters, the determination of the USDA Meat Grader shall be final and 

binding on all parties. 

10. Exchange Certificate 

The rules of the Exchange in regard to the Exchange Inspection Certificate are not applicable to delivery under this 

Chapter.
19

Appendix B

CME Rulebook

CHAPTER 7

DELIVERY FACILITIES AND PROCEDURES

(Additions are underscored; deletions are struckthrough.)

APPENDIX

Live Cattle Maximum Daily Grading Capacities at Approved Stockyards by delivery territory.

The following live cattle grading capacity limits at approved stockyards are in effect beginning with the February 2014 

live cattle delivery cycle:

Colorado Delivery Territory: 

Approved Stockyard Maximum Daily Grading Capacity (contracts)

Wray CO 10

Iowa / Minnesota / South Dakota Delivery Territory: 

Approved Stockyard Maximum Daily Grading Capacity (contracts)

Worthing SD 60

Kansas Delivery Territory: 

Approved Stockyard Maximum Daily Grading Capacity (contracts)

Dodge City KS 40

Pratt KS 10

Syracuse KS 25

Nebraska Delivery Territory: 

Approved Stockyard Maximum Daily Grading Capacity (contracts)

Columbus NE 15

North Platte NE 20

Ogallala NE 25

Texas / Oklahoma / New Mexico Delivery Territory:

Approved Stockyard Maximum Daily Grading Capacity (contracts)

Amarillo TX 60

Clovis NM 15

Texhoma OK 30

Tulia TX 30