When marketing livestock, one must have some anticipation of what market conditions will be in the future as well as the present. The old days of sell when the cattle are ready have long been gone. With futures and options, producers now have a powerful marketing tool that allows them to make sales or purchases of product for future delivery at prices that are available and suitable to them today. If you know that a pen of cattle will be ready for marketing in August and today's price level is acceptable, you can make that sale today and deliver in August. You have theoritically eliminated the risk of price fluctuation. If you do nothing and wait for August to get here, the price may be higher or lower than it is at the present. The purpose of the futures and options market is to reduce the risk of adverse price fluctuation that is inherent in livestock production. My analysis is purely my own. Whether right or wrong on my analysis, I am taking steps to make sure that if prices continue to fall, producers will have had an opportunity to lock in prices available today that may or may not be available in the future.
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