Lenders/Borrowers

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Anonymous

This afternoons "Shootin' the Bull" commentary will be on the relationship that both lenders and borrowers can have using futures and options. At times, lenders will be more aggressive at lending money if the proper risk management plan is in tact as well as, the borrower potentially at less risk by having his production hedged for future sale. If you have any questions after reading the commentaries, please feel free to contact me at anytime.

Futures trading is not for everyone. The risk of loss in trading futures can be substantial; therefore, carefully consider whether such trading is suitable for you in light of your financial condition.



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Anonymous

Most traders feel that the live cattle futures are technically overbought, and are subject to collapse. Others, studying the fundamentals are looking at half full/half empty feedlots combined with a short supply coming in, suspect it will lead us to record high prices in the next few months. Whats your views? Whats your advice for the producer with marketable feeders who are not trading futures?

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Anonymous

Your question is asked to me about 10 times a day. About 2 months ago I realized that the objective was no longer trying to pick a top against the extension in this market. So, I went back to the school books and looked at what "Hedgers" should be doing. A negative basis is a producers best friend. It allows him/her to make sales at a higher level in the future that may or may not actually be there when the future becomes the present. When I see the fewer numbers in the feed lots, I am still reminded that these numbers are lower off of record highs last year. Not only that, as profitability returns, custom feed lots can begin their sales pitch to regain lost clientle. With everything, the higher price will always curb demand. History shows us this repeatedly. So, a good marketer will look the 4, 6, 8 months down the road and say, I can live with X price and be happy regardless of the what the future holds. It's these individuals who take the risk factor out of the production picture that generally come out better time and time again. Be it Feeder cattle or Fat cattle, either be locking in cash forward contracts or use futures and or options to lock in what is currently available.

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