Cattle futures

[kenny thomas]

With feeder futures for November 2023 being approximately 25 cents higher than January 2023 183.85 ve 208.35 today how is that changing anyone's plans for the future?
I wanted to downsize next fall but is it really the time?

 

[J+ Cattle]

I predict that we'll have a couple of years of really good prices before they start trending downward, the big question is how much will input costs go up during that same time period.

 

[Brute 23]

I'm far more worried about inputs than prices.

 

[50/50Farms]

Yeah, I agree about inputs. I think in the long run, if inputs don't get better, we're going to see some changes in the beef market.

 

[gcreekrch]

With feeder futures for November 2023 being approximately 25 cents higher than January 2023 183.85 ve 208.35 today how is that changing anyone's plans for the future?
I wanted to downsize next fall but is it really the time?

I thought bred cows were going to be 3000 this fall here. They weren't so we bought more. Next year we will cash in if the threshold arrives. We have not always sold at the top of the market but taking a profit when it is there is not a bad thing.

Selling calves this fall was very good, next year will be better.

 

[Silver]

Selling calves this fall was very good, next year will be better.

I'm gonna hold you to that!

 

[farmerjan]

I am feeling along the same lines as @gcreekrch for calves to do better this year coming. I also think that breds and cow/calf pairs will be higher for the next year or 2.... and heifers here are a little higher this fall than earlier and I think that will get better as many try to chase the bred market. Sure hoping that my "feelings" are in the right direction.

 

[Djm961]

With feeder futures for November 2023 being approximately 25 cents higher than January 2023 183.85 ve 208.35 today how is that changing anyone's plans for the future?
I wanted to downsize next fall but is it really the time?

In my case I don't really look at what the future might hold. I try to only feed hay a month or two and my inputs are very minimal. I sell dependent on what cow decides to try and get a free ride for the year and what moisture is looking like in the fall. If I was considering downsizing because of age or freeing up more time, sell while the prices are strong

 

[Dave]

I called a guy about Livestock Risk Protection today. August when these steers will leave the futures is slightly over $2.00. They cost me about $1.80 when I bought them. It is costing $1.68 a day to feed them. $2.00 would be real nice. It would cost me about $35 a calf to lock that in.

 

[wbvs58]

We have just had a very lucrative couple of years with cattle here, along with very good seasons due to the La nina however things are changing and even though it is still La nina it has been a very dry Nov/Dec and our cattle market is falling. I am still optimistic that prices will stabilise so prices will be fair for all.
I suspect that your drought areas will get rain this coming spring and your seasons return to normal as they seem to be contrary to us. Good prices in the US are always good for us where we compete in the same export markets. Herd rebuilding in the US also means more opportunity with exporting our lean meat.

Ken

 

[kenny thomas]

I called a guy about Livestock Risk Protection today. August when these steers will leave the futures is slightly over $2.00. They cost me about $1.80 when I bought them. It is costing $1.68 a day to feed them. $2.00 would be real nice. It would cost me about $35 a calf to lock that in.

So do you think it's worthwhile now that it looks really good for next fall? Or if it looked shaky would you be more inclined to get the Livestock Risk Protection.

 

[Dave]

Well..... LRP is entirely based on the futures and has nothing to do with the cash market. Now the two are definitely related but how closely? It is insuring against a large drop in the futures market. Looking back 2015 this would have paid like a slot machine. 2013 and 2014 it would have cost money. The question becomes how stable do the markets look today.
One example he talked about was a producer with a good size herd. His coverage was to late March. In January it was looking like he would be writing a big check. Then the Russians invaded and a few other things which cause the futures to drop. So instead of having to write a $10,000 check they gave him a $40,000 check.
There is different time lines and % of coverage. The closer you are the the LRP closing date and the lower the % is the cheaper the coverage is. He put me on an email list that give the information every day.
Example steer 600-1000 pounds with an end date of 3/31 (the shortest coverage available today)
The expected value is $1.8640 The lowest rate of coverage is $1.66 which means the futures market and some other figures calculated out for a value would have to drop below $1.66 for you to get paid. With that coverage your premium is $1 per head

The other extreme. Steer 600-1,000 end date of 10/27 (longest coverage they list today)
The expected value is $207.34. The highest % coverage rate is $2.079. The premium is $51 per steer.

The way I see it is if you figure when you plan to sell and what your except able break even is counting the premium. So you are insured against a serious down turn which would put you in to a loss situation. It was not what I was thinking it was. I don't know that I will do it but I don't know that I won't do it either. But it is certainly worth looking at. And you can do as many or as few head as you want. So it might be worthwhile to do a few head just to check the water.

 

[kenny thomas]

Well..... LRP is entirely based on the futures and has nothing to do with the cash market. Now the two are definitely related but how closely? It is insuring against a large drop in the futures market. Looking back 2015 this would have paid like a slot machine. 2013 and 2014 it would have cost money. The question becomes how stable do the markets look today.
One example he talked about was a producer with a good size herd. His coverage was to late March. In January it was looking like he would be writing a big check. Then the Russians invaded and a few other things which cause the futures to drop. So instead of having to write a $10,000 check they gave him a $40,000 check.
There is different time lines and % of coverage. The closer you are the the LRP closing date and the lower the % is the cheaper the coverage is. He put me on an email list that give the information every day.
Example steer 600-1000 pounds with an end date of 3/31 (the shortest coverage available today)
The expected value is $1.8640 The lowest rate of coverage is $1.66 which means the futures market and some other figures calculated out for a value would have to drop below $1.66 for you to get paid. With that coverage your premium is $1 per head

The other extreme. Steer 600-1,000 end date of 10/27 (longest coverage they list today)
The expected value is $207.34. The highest % coverage rate is $2.079. The premium is $51 per steer.

The way I see it is if you figure when you plan to sell and what your except able break even is counting the premium. So you are insured against a serious down turn which would put you in to a loss situation. It was not what I was thinking it was. I don't know that I will do it but I don't know that I won't do it either. But it is certainly worth looking at. And you can do as many or as few head as you want. So it might be worthwhile to do a few head just to check the water.

You have explained it very well. Many think 2023 will be a repeat of 2014. If it really is then yes it would cost you. But if something happens the price is good piece of mind.
I know of some buyers that use it to pretty much get the loan to buy the cattle. Many banks are recognizing it as a safety net and I suspect some even require it.

 

[bhooper]

You have explained it very well. Many think 2023 will be a repeat of 2014. If it really is then yes it would cost you. But if something happens the price is good piece of mind.
I know of some buyers that use it to pretty much get the loan to buy the cattle. Many banks are recognizing it as a safety net and I suspect some even require it.

Are the buyers able to buy LRP coverage that locks in a profit after all their expenses?

 

[kenny thomas]

It's all according to the futures price. You can buy for a certain month and you can also insure for a percentage of the full price at a reduced rate. If the buyer figures his cost plus his expenses will figure up to a break even of 1.80 he could insure for maybe 85% of a November 2.08 futures to be sure he breaks even. That cost less than a 90%. Or he could gamble and insure for 80% if he can cover any losses that might occur.

 

[kenny thomas]

The hardest thing to grasp for many is that it is not based on what you actually sell them for or even if you sell. The cost or payment to you will happen when the date comes no matter if you sell or not.
I'm sure others can explain it better than I have. But for many it's a great safety net.

 

[Dave]

And you get to choose size up to 599 pounds or 600 to 1,000 pounds and the rates are different for steers or heifers.

 

[kenny thomas]

And you can insure 1 to 1000 or more I think. It doesn't have to be load lots because it isn't based on you actually selling them.

 

[gcreekrch]

I am more of a keep insurance premiums in my bank account kind of guy. A couple times buying crop insurance and once with price insurance on calves that never paid. $20,000 we will never see again. Much more inclined to spend money on a cheap calf that has 90% chance of surviving and making a profit.

 

[50/50Farms]

I am more of a keep insurance premiums in my bank account kind of guy. A couple times buying crop insurance and once with price insurance on calves that never paid. $20,000 we will never see again. Much more inclined to spend money on a cheap calf that has 90% chance of surviving and making a profit.

Dependent on environment. Y'alls major extreme weather is something cattle are designed to survive, ours is something that can kill them with boring regularity.