5-6 wt stocker calves

[Stocker Steve]

I started with:
- leased land (payable at the end of the season)
- a credit card advance
- a new goldenrod, new fencing pliers, some generic meds, and a borrowed deer rifle
- and LRP (livestock risk protection from the same people who sell crop insurance)

I went in for an operating loan after generating a couple years of sch Fs, and had an interesting time with the cash flow and Return On calculations.

 

[js1234]

What form of hedge/risk management do you use to minimize risk on stocker cattle

Forward contracts, straight hedges, options, basis trades really depends on the particular set, the market, weather, our needs etc. I don't know that there is a perfect tool, stay flexible and capture profit as it presents itself.

 

[cross_7]

Let me ask for some opinions/advice here
I ended up with some leased dirt from the state of Oklahoma that's attached to the place I just bought
I understand that due to the on going drought the state has made some pull cattle
I don't want to buy cows then be forced to sell them
I'm thinking about steers but idea of dropping 1000 a head concerns me some, back when it was 400 a head I didn't worry too much and never had any protection
But now it could sure cause a financial crisis
What would be my best option on calves bought early spring @ 500# and sell early fall ?
My thought is a straight forward contract but the target weight and gain could throw a kink in that
I've had puts explained 10 different ways but it comes down to making money with paper when you lose money on actual cattle and I don't see that as apples to apples. You could still lose on tht deal the way I see it
So what other options do I have ?

 

[bigbull338]

if your worried about the drought.why not buy some short solid mouth bred cows or pairs.keep them till you run out of grass an then sell emm all.

 

[js1234]

Let me ask for some opinions/advice here
I ended up with some leased dirt from the state of Oklahoma that's attached to the place I just bought
I understand that due to the on going drought the state has made some pull cattle
I don't want to buy cows then be forced to sell them
I'm thinking about steers but idea of dropping 1000 a head concerns me some, back when it was 400 a head I didn't worry too much and never had any protection
But now it could sure cause a financial crisis
What would be my best option on calves bought early spring @ 500# and sell early fall ?
My thought is a straight forward contract but the target weight and gain could throw a kink in that
I've had puts explained 10 different ways but it comes down to making money with paper when you lose money on actual cattle and I don't see that as apples to apples. You could still lose on tht deal the way I see it
So what other options do I have ?

1. Let someone else fool with true calves. Buy long tailed yearling types, harder to find and will cost more per pound but worth it. This will lend itself to more consistency when projecting your gains and almost certainly reduce doctoring. Just contracting the cattle is fine. Ask your neighbors what they historically get for gains and be conservative. Far better to get into the slide 30lbs. than to be 30lbs. under the base.
2. Hedging and selling physical cattle is not apples to apples. It is however, a great tool for risk management. If the market feels toppy, sell the board. If you're wrong, the cattle sell for more and that offsets the paper loss basically. If you're right, the hedge does it's job and protects you from market deterioration. This is of course overly simplistic but is the basic thought to a straight hedge.
3. There isn't one right answer and certainly isn't a formula that always works or fits all situations.
4. Goodluck and have fun.