Pure Hedge

Peter McGinnGeneral Commentary

PURE HEDGE

CATTLE

In my opinion with the cattle on feed report being a bullish report with On Feed 3% lower, Placements 8% lower, and Marketings 6% lower but slow demand with the cold storage report showing a 7.3% increase from a year ago, higher prices may be limited. Producers are carrying all the risk in the cash market right now if they are not properly hedged. I am still of the opinion that, with feed costs at current prices, and all other costs being equal, $140-$145 puts should be bought for breakeven operating costs for feedlots. Cow calf operators, in my opinion [and depending on other variable costs], should be looking at buying cheap $170- $175 puts to protect themselves from any downside risk. In order to take full advantage of price discovery, we must keep an astute eye on potential slaughter numbers and monthly Cattle on Feed reports.  Please take a look at the below listed puts and calls, so we can have a productive conversation about hedging your beef production using real examples. Also, select the link at the bottom to use our Cattle producers’ BREAKEVEN CALCULATOR to have a more defined outlook at how you can protect your production. Keep in mind, commissions and fees are not included in the cost of the option.

LIVE CATTLE– PUTS

MONTHSTRIKEPRICEPREMIUM COST
FEB148.012$4.80
 146 .012$4.80
144.012$4.80
APR148.225$90
 146.150$60
 144.125$50
    
JUN148.900$360
 146.675$270
 144.500$200

*Cost in above table does not include commissions and fees

LIVE CATTLE– CALLS

MONTHSTRIKEPRICEPREMIUM COST
FEB 156 1.075 $550
           158.225 $190
160.050$50
APR1602.400$960
 1623.350$1340
 1644.550$1820
    
JUN1583.575$1430
 1602.650$1060
 1621.875$750

*Cost in above table does not include commissions and fees

FEEDER CATTLE–CALLS

MONTHSTRIKEPRICEPREMIUM COST
MARCH1881.250$625
 190.825$412.50
 192.575$287.50
   
APRIL1883.475$1737.50
 1902.625$1312.50
 1921.975$987.50
MAY1905.450$2725
 1924.425$2212.50
 1943.550$1775

*Cost in above table does not include commissions and fees

FEEDER CATTLE–PUTS

MONTHSTRIKEPRICEPREMIUM COST
MARCH1781.000$500
 174.400$200
 170.175$87.50
   
APRIL178.775$387.50
 174.375$187.50
 170.175$87.50
   
MAY178.675$337.50
 174.375$187.50
 170.175$87.50

*Cost in above table does not include commissions and fees

CATTLE PRODUCERS HEDGING CALCULATOR

..\..\..\..\..\..\..\Documents\Cattle Producer calculator.xlsx

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