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October 1, 2025
2025 Kansas Crop Insurance Presentations
marketing of agricultural products, and gain from the sale of …
June 28, 2018
Hedging & Options
USDA AMS data on regional live cattle production, marketing, and price discovery; CFTC
data on commitment of traders; and CME Group data on contract deliveries
3 …
ROLE OF LIVE CATTLE FUTURES
This segment of this report summarizes the importance of live cattle futures and composition of
traders comprising the contract. This information is central to the major objectives of this
project as it documents the growth in the live cattle futures contract; it’s importance to short
hedgers mitigating price risk; and the relatively small number of natural long hedgers present in
the market. We rely on this information in later sections of this report where we synthesize key
takeaways.
Purpose and Importance
Futures markets serve major roles of risk transfer, price discovery, and price forecasting. The
CME Live Cattle Futures contract has been actively traded since 1964. Today, live cattle futures
daily volume typically exceeds 50,000 contracts traded.
Risk Transfer
The most important role of a futures market is providing a tool for risk management. Without
hedgers, a commodity futures market will not survive. As a risk management tool, futures
provide a market where price risk can be largely alleviated for a hedger by taking a futures
position that is opposite the hedger’s existing or expected cash market position. Cattle feeders
sell live cattle futures to lock in a margin for cattle as feeder cattle are placed in the feedyard or
during the feeding period. Once the cattle are ready for harvest, the cattle feeder hedger who is
short the futures contract can sell the cattle to a beef packer and buy back the futures position.
Assuming the cattle meet contract specifications, the feeder can alternatively opt to deliver the
cattle to fulfill the short futures position obligation. Through these transactions, the short cattle
hedger has effectively established a future selling price for cattle well in advance of harvest,
thereby mitigating price risk. The hedger’s remaining fed cattle price risk is basis risk.
Establishing a future selling price upon placement of feeder cattle means that feeders also give
up positive risk, should prices increase. Many feeders who are less risk averse may place feeder
calves and wait to see how market conditions evolve before taking a position in the futures
market. In any case, the option to deliver cattle to fulfill futures positions give short hedgers a
mechanism by which to make convergence more predictable and reduce basis risk. More
discussion related to basis is included later in the discussion of delivery of live cattle to fulfill
short futures position.
The CME Live Cattle Futures Contract can be used in an equivalent way by long hedgers who
buy live cattle (or beef as a cross‐hedge) as inputs to their business. In this case, the buyer of
live cattle would establish a long position in the futures market at some point before the cattle
are needed. This allows the long hedger to lock in an expected price that would lead to
profitable sale of the final product. At the time the long hedger buys cash cattle the futures
position is offset by selling futures. In the case of the long, delivery is more nuanced. The long
cannot initiate delivery. However, if willing to accept delivery, the long can influence
convergence maintaining a long position as contract expiration nears.
5 | P …
May 9, 2013
Year Ago Weight Year Ago Production Year Ago
2012
I 8,026 …
July 10, 2020
Fed Cattle Pricing
completely or drastically reduce production, markets reacted to the expected …
February 16, 2014
Land Leasing
Forms
Equipment
Acknowledgements
This publication is a product of the North Central Regional …
August 1, 2025
Breakout Sessions
Summary Book - All Counties
ANALYSIS……………………………………………………………….... 4
VALUE FARM PRODUCTION / ACCRUAL NET FARM INC 1980 …
Summary Book - All Counties
provide farm families with production and
financial management …
Summary Book - All Counties
provide farm families with production and
financial management …
Summary Book - All Counties
provide farm families with production and
financial management …