In my opinion the cattle on feed report was a bullish report with On Feed 3% lower, Placements 8% lower, and Marketings 6% lower but slow demand from the packers this week caused a sharp drop in futures market prices with Live cattle having a high of 158.82 in the February contract 10 sessions ago, to a closing price yesterday of 156.62. Producers are carrying all the risk in the cash market right now if they are not properly hedged. On Friday there was a range of cash trades from $153-$158 with an average of $155 and $248 average for dressed steers. I am 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
| MONTH | STRIKE | PRICE | PREMIUM COST |
| FEB | 148 | .025 | $10 |
| 146 | .025 | $10 | |
| 144 | .025 | $10 | |
| APR | 148 | .325 | $130 |
| 146 | .225 | $90 | |
| 144 | .175 | $70 | |
| JUN | 148 | 1.325 | $530 |
| 146 | .875 | $350 | |
| 144 | .650 | $260 |
*Cost in above table does not include commissions and fees
LIVE CATTLE– CALLS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| FEB | 156 | 1.375 | $550 |
| 158 | .475 | $190 | |
| 160 | .125 | $50 | |
| APR | 160 | 2.900 | $920 |
| 162 | 1.975 | $790 | |
| 164 | 1.275 | $510 | |
| JUN | 158 | 3.100 | $1240 |
| 160 | 2.250 | $900 | |
| 162 | 1.600 | $640 |
*Cost in above table does not include commissions and fees
FEEDER CATTLE–CALLS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| MARCH | 188 | 1.050 | $525 |
| 190 | .750 | $375 | |
| 192 | .525 | $262.50 | |
| APRIL | 188 | 3.175 | $1587.50 |
| 190 | 2.425 | $1212.50 | |
| 192 | 1.850 | $925 | |
| MAY | 190 | 5.150 | $2575 |
| 192 | 4.225 | $2112.50 | |
| 194 | 3.425 | $1712.50 |
*Cost in above table does not include commissions and fees
FEEDER CATTLE–PUTS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| MARCH | 178 | 2.050 | $1025 |
| 174 | .975 | $487.50 | |
| 170 | .450 | $225 | |
| APRIL | 178 | 1.375 | $687.50 |
| 174 | 1.000 | $500 | |
| 170 | .375 | $187.50 | |
| MAY | 178 | 1.100 | $550 |
| 174 | .625 | $312.50 | |
| 170 | .350 | $175 |
*Cost in above table does not include commissions and fees
CATTLE PRODUCERS HEDGING CALCULATOR
..\..\..\..\..\..\..\Documents\Cattle Producer calculator.xlsx
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