In today’s environment, the producer or feeder who can attempt to limit risk without locking themselves out of large price gains will have the greatest chance of staying in business over the long run.

For these reasons, Agri Trading, LLC’s approach to using futures markets to manage price risk in the cattle business focuses heavily upon the use of Options. By using Options, a producer can hedge against much of the risk of falling prices without greatly limiting the gains from rising prices.

Agri Trading, LLC’s risk management tools include:

1). A working knowledge the various option strategies that can be implemented to set a price floor.

2). Spreadsheet programs tailored to a specific customer’s feeding costs. By using your own feeding costs for different feeder weights and plugging in the different Live Cattle futures prices, a cattle feeder is able to identify potentially profitable hedges. When the feeder cattle can be purchased in the cash market at the appropriate price level, a Live Cattle hedge will be placed at the time of purchasing the feeder cattle. By watching several different Live Cattle futures contracts, this approach gives the customer the ability to look forward several months. When the right market conditions exist, a producer could buy feeder cattle on a video auction for delivery in three months and at the same time, enter into a Live Cattle hedge,which would attempt to limit risk price in the time frame when those cattle would be finished.

3). Agri Trading, LLC will monitor the futures and options prices and notify its customers when those prices have reached a level the customer is willing to accept as a floor for a particular group of cattle.

4). The use of historical seasonal trends in the corn market to better determine the need to hedge feed inputs.

5). Agri Trading, LLC will always be willing to work with any custom feedlot a customer may use to feed cattle in order to better understand that customer’s marketing needs.

As part of the service to our livestock customers, Agri Trading, LLC tracks the fundamental data released by the USDA. With one phone call, livestock hedgers can obtain information of the latest Cattle on Feed Report, daily beef prices, daily live prices, and weekly beef production.

Using price risk management tools is one way to reduce some of the risk inherent in production agriculture. Check with Agri Trading, LLC anytime to discuss the choices you have when it comes to managing price risk.

For more information on price risk management strategies or to open an account:

Please call toll free: 1-877-283-6710