Investing at feedlot

[alohacattle]

@ novatech

I must apologize in advance, because I do not understand anything you have said.
What would be the reason that cattle in a feedlot could not have price protection via puts and calls?

Also what did you mean when you said a person could I guess but you would feed yourself into the poor house? Remember I apologized in advance for my misunderstanding.

 

[1982vett]

@ novatech

I must apologize in advance, because I do not understand anything you have said.
What would be the reason that cattle in a feedlot could not have price protection via puts and calls?

Also what did you mean when you said a person could I guess but you would feed yourself into the poor house? Remember I apologized in advance for my misunderstanding.

if you are going to play "puts and calls" ....what do you need cattle for? ;-) ;-)

 

[MF135]

@ novatech

I must apologize in advance, because I do not understand anything you have said.
What would be the reason that cattle in a feedlot could not have price protection via puts and calls?

Also what did you mean when you said a person could I guess but you would feed yourself into the poor house? Remember I apologized in advance for my misunderstanding.

if you are going to play "puts and calls" ....what do you need cattle for? ;-) ;-)

Dude, just quit while your ahead.. you obviously haven't a clue about the financial sector. There is a huge difference between speculating in the financial casino and utilizing options to hedge a profit.

 

[alohacattle]

@ 1982vett

Without the cattle, puts and calls are worthless.

 

[Amo]

Exactly. If your not using the cattle/grain etc. as a back up against your puts and calls or vise versa, you are playing the stock market. Its just in Chicago instead of Wall Street. For cow calf its kinda hard to do it, thought about it alot though. I do think it would be pretty easy to "burn" up your possiable profit by buying lots of puts and calls. I know they say there is a sucker who thinks its going to go the other way and buy what your trying to dump...but whos to say who is right? Dang speculators anyhow. They sure mess up supply and demand!

If I was going to do it, Id find my own order buyer. The feedlot doesn't make money if they aren't full. Really thats all they are concerned about. I cant telly ya weather to buy poorer quality cattle or good English type, but make sure they have had a good health program. My newphew worked for a guy that bought cheap stuff out of the south east. Must of never seen a shot, and the owner they were feeding for wanted it done as cheap as possiable. Gave them a shot of nuflor right off the truck and that was it. They averaged a death loss of 3 a week! That would of bought better quality cattle or tons of vaccine even if they did it when they got to the lot.

 

[novatech]

@ novatech

I must apologize in advance, because I do not understand anything you have said.
What would be the reason that cattle in a feedlot could not have price protection via puts and calls?

Also what did you mean when you said a person could I guess but you would feed yourself into the poor house? Remember I apologized in advance for my misunderstanding.

You can tell your buyer at what price to buy. (call) When you sell is a different story.If you keep your (a specific group)cattle in the lot and continue to wait for your sale price you must continue to feed them. At some point the cattle no longer have the weight gain per day that you need to make a profit. From that point on the cattle can be costing you money even if the market price goes up. Cattle are sold at target weight or number of days on feed not target price.
If I am wrong please tell me how to make a profit on a specific pen full of feeders using calls and puts. I fully admit I know relativly nothing about the stock market.

 

[alohacattle]

@ Novatech

My call would be on the feed and the calves. My put would be on the fat cattle. Neither of which the feedlot operator has anything to do with, that is done thru CME.

I have guaranteed myself a profit on 40,000 of cattle when I placed the call on the feed and calves and put on the fat cattle, if not I never should have paid the premiums. I know in advance of buying and selling everything exactly what I will spend on feed and calves and what I will recieve for income from fat cattle.

Now with those puts and calls I can always make more $$$$ but never less. The cash commodity will move relative to the futures.

Now I may end up with poor calves or a bad feedlot operator but that is no fault of the market. That is the rancher (poor calves) and feedlot operators (poor herdsmanship) fault.

A call is a certain amount of a commodity in a certain month. A put is just the same.
You are going to buy and sell a certain quantities in specified months regardless of futures or cash price, your price was set with the put and call.

 

[GMN]

We are considering buying a pen of cattle to feed at feedlot. Anyone ever done this? Looking at having feedlot buy 100 head using their buyer and feed them out. They are showing us projections of cost of gain and return based on various feed and cattle prices. Does not look like there is fortune to be made but the returns are better than what the bank is paying.

Frankly I wouldn't trust it, or anyone who runs a salebarn-