Feeder cattle futures continue to show strength moving above $160/cwt. for the first time in over a year. Good beef demand and strong prices for 600+ pound calves have given the fuel to push prices higher. After breaking through resistance near $155/cwt., producers should watch closely for a pull-back. Live cattle futures have also traded into a new contract high closing above $125/cwt.
Now is a great time for cow/calf producers who are selling stocker cattle. Producers purchasing cattle or retaining ownership of raised calves have some decisions to make regarding the marketing of those animals. While prices could remain high, budgets are profitable and some producers will take the opportunity to price cattle.
March feeder cattle are trading near $158/cwt. and a March $156/cwt. put option will cost $6.00/cwt. In that scenario, a producer can establish a floor at $150/cwt. that is $10/cwt. above support in the futures market. All while leaving upside potential open. Determine breakeven prices and work to protect profitable budgets. Cattle could provide the cash flow required to operate farm businesses as grain prices struggle.
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