We’ve been getting lots of questions on how to protect fall/winter feeder cattle that are currently being born. Feeder cattle futures are continuing to put in new highs over the past 3 months and are starting to approach all-time highs around $2.45 futures. The fundamental outlook on cattle is friendly, although protecting high values also make good financial sense.

  1. Livestock Risk Protection (LRP)
    • Insurance policy that is federally subsidized anywhere from 20-35% depending on the strike of put. Revenue protection is generated by the feeder cattle futures, but they settle against the feeder cattle index which is the average price of the sale barns in the Midwest.
      • For example, if your policy is against 600lb steers, your policy will be settled vs what the average price that week is of a 600lb steer in the Midwest.
    • Seasonal timeframe on November feeder futures is June-Aug
  1. Hedging futures or buying puts
    • Feeder Cattle Futures are based on ~800lb steers
      • November futures are at $2.26/lb which would relative to $1,808 of revenue of a 800lb steer.
      • Feeders are 50,000 lb contracts / 800lb animal would be roughly 62.5 head.
    • Live Cattle Futures are 40,000 lb contracts based off est. finish weight.  Ex. 40,000 / 1300lb finish weight = roughly 30hd.

Feel free to give us call if you would like to discuss ways of protecting feeder cattle!