On the Chicago Mercantile Exchange, live cattle futures are standardized, exchange-traded contracts (CME). The contracts cover the delivery of full-grown calves that have achieved a weight of between 1,200 and 1,400 pounds and are ready to be delivered to meat processors. Because futures were primarily traded on storable commodities like grain at the time, the introduction of live cattle futures in 1964 was a bold step. Since then, the live cattle futures contract has gone through a number of revisions, each of which has improved the contract’s utility in risk management systems. Cattle producers have been able to better manage their pricing risk thanks to these technologies.
How do cattle futures are calculated?
Each 40,000-pound Live Cattle futures contract has a minimum price variation of $.00025 per pound, or $10 every tick. Monday through Friday, 8:30 a.m. to 1:05 p.m. Central Time, the contract trades (CT). With a minimum tick increment of $, the Feeder Cattle futures contract represents 50,000 pounds.
What is the procedure for cattle contracts?
To be successful in the beef cattle business, today’s cattlemen use a range of tools. Simple and intricate tools of the profession, ranging from fencing pliers to genomic-enhanced EPDs for performance indicators, assist cattlemen in completing the day’s task and making decisions to maximize profitability.
The cattle futures market is a complicated marketing instrument for cattlemen. Animals futures contracts are legally binding contracts between a buyer and a seller for the delivery of cattle at a specific time. These contracts are negotiated in a futures market, such as the CME group or the Chicago Mercantile Exchange, and have been around since 1964.
Scott Varilek works at Kooima & Kaemingk Commodities in Sioux Center, Iowa, as a commodity broker. Varilek assists his customers in placing trade orders based on a risk management strategy and a price that is suitable for that particular producer.
How do you go about purchasing cattle futures?
On the CME Globex electronic trading platform, live and feeder cattle futures and options are traded. Cattle options are also available on the trading floor via open outcry. Feeder Cattle contracts are cash-settled, whereas Live Cattle contracts are physically delivered.
Where does the price of livestock futures come from?
In a futures market, the price is determined by the interaction between supply (sellers’ offers) and demand (buyers’ bids). Many of these bids and offers come from players in the cash market.
What does a live cattle futures contract cost?
Contract parameters for live cattle futures. $10.00 per contract, $0.025/cwt (0.025 cents per pound). Monday, 9:30 a.m. U.S. ET to 2:05 p.m. U.S. ET, live cattle futures trade electronically on the Globex trading platform.
What is the price of a feeder cattle contract?
Feeder cattle futures contracts are valued $12.50 per contract and have a specification of 0.025/cwt (0.025 cents per pound). Feeder cattle futures are traded electronically on the Globex platform from 9:30 a.m. to 2:05 p.m. ET on Monday.
Feeder cattle are more expensive than live cattle for what reason?
Feeder cattle and live cattle are the two sorts of cattle that are traded by livestock traders. The stage of the production cycle distinguishes these two commodities.
Weaned calves weighing between 600 and 800 pounds are considered feeder cattle. Feeder cattle are then placed in a feedlot and fed a high-energy feed diet consisting primarily of corn and other grains. Feeder cattle require more than 500 pounds of gain before reaching slaughter weights, therefore corn prices have a significant impact on feeder cattle pricing.
On the other hand, live cattle are ‘finished’ products that are ready to be sold to slaughterhouses.
How do I go about investing in cattle?
The cattle are moved to the farm management partner farms after they have been acquired. The animals will receive round-the-clock care and supervision from highly trained farm staff as well as a veterinarian.
- On an average of 107.369 sq.ft. (10.000 m2) of land, just one or two animals graze.
- Animals are kept on open fields all year and gain up to 1.65 pounds (0.75 kilogram) per day from natural grazing.
Why are the prices of feeder cattle falling?
Between March and July, the feeder cattle market saw a large level of price volatility. Retail meat demand has been historically strong, and meat exports to China have pushed prices up. While there have been some favorable price moves for feeder cattle, the most of the downward price pressure has been due to fodder production uncertainties and rising grain costs. Drought conditions in the Western United States have forced feeder cattle and cull cows to come to market earlier, and increased grain prices have prompted a run-up in grain prices due to poor stocks-to-use ratios and declining global maize production, diminishing a feedlot’s demand for feeder cattle. Feeder cattle prices can be lowered by increasing the supply of feeder cattle from producers and decreasing the demand for feeder cattle from feedlots.
