In my opinion with cash cattle trade developed late Thursday, with prices as much as $4 higher in the northern market. Packers dragged out cash cattle negotiations as long as possible, hoping feedlots would sell around steady prices. But feedlots dug in their heels and were rewarded. The sharply higher cash prices should trigger a wave of buying in live cattle futures, which held modest premiums to the cash market on Thursday’s close. Wholesale beef prices also firmed, with Choice up $2.09 and Select 85 cents higher on Thursday. But traders have been rather cautious buyers of cattle futures despite supportive cash fundamentals and the bullish longer-term outlook. 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 $180- $190 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 |
| APR ($163.950s) | 152 | .150 | $60 |
| 150 | .100 | $40 | |
| 148 | .075 | $30 | |
| JUN ($159.750s) | 152 | .975 | $390 |
| 150 | .700 | $280 | |
| 148 | .500 | $200 | |
| AUG ($158.700s) | 152 | 1.825 | $730 |
| 150 | 1.400 | $560 | |
| 148 | 1.075 | $430 |
*Cost in above table does not include commissions and fees
LIVE CATTLE– CALLS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| APR ($163.950s) | 170 | .425 | $170 |
| 168 | .825 | $330 | |
| 166 | 1.425 | $570 | |
| JUN ($159.750s) | 170 | .400 | $160 |
| 168 | .625 | $250 | |
| 166 | 1.000 | $400 | |
| AUG ($158.700s) | 170 | .625 | $250 |
| 168 | .925 | $370 | |
| 166 | 1.350 | $540 |
*Cost in above table does not include commissions and fees
FEEDER CATTLE–CALLS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| MARCH ($186.400s) | |||
| 188 | 2.050 | $1025 | |
| 190 | 1.375 | $687.50 | |
| 192 | .900 | $450 | |
| APRIL ($190.675s) | |||
| 188 | 5.300 | $2650 | |
| 190 | 4.150 | $2075 | |
| 192 | 3.175 | $1587.50 | |
| MAY ($194.550s) | |||
| 194 | 4.800 | $2400 | |
| 196 | 3.850 | $1925 | |
| 198 | 3.025 | $1512.50 |
*Cost in above table does not include commissions and fees
FEEDER CATTLE–PUTS
| MONTH | STRIKE | PRICE | PREMIUM COST |
| MARCH ($186.400s) | |||
| 178 | .500 | $250 | |
| 174 | .225 | $112.50 | |
| 170 | .100 | $50 | |
| APRIL ($190.675s) | |||
| 178 | .525 | $262.50 | |
| 174 | .250 | $125 | |
| 170 | .150 | $75 | |
| MAY ($194.550s) | |||
| 178 | .475 | $237.50 | |
| 174 | .275 | $137.50 | |
| 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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