![]() Hedgers using the futures market take an offsetting position from the one they have in the cash market. Hedgers want to protect a price that will make them a profit. Speculators are in the futures market to capitalize on price changes, while hedgers are in the futures market to mitigate the risk associated with price changes. Hedging is exactly the opposite of speculating in the market. ![]() ![]() The hedger establishes a price for a commodity that is either currently owned or committed for production and that will be delivered at some time in the future (e.g., grains, oilseeds or livestock), or that will be purchased in the future (e.g., feed ingredients bought by livestock producers, or crops by elevators, gins, etc.). The other trader in the market is the hedger. Sounds easy, doesn't it? Well, before you jump in, be assured that the majority of futures market speculators (in fact, almost 90 percent) lose money at some point. So the key to speculating is buying low and selling high or selling high and buying low. However, they do know (or think they know) that the price of beans or cattle is too low (or high) and hope that by buying (or selling) futures contracts today they can later liquidate the contracts at a profit. They may not even know what a soybean looks like, or the difference between a Holstein and a Hereford. Speculators trade to make a profit from price level changes. They have no intention of either delivering or accepting delivery of the product traded. They establish a price for a commodity that they neither currently own nor have committed to produce. Speculators enter the futures market with the objective to make a profit from changes in futures prices. Two groups are interested in futures trading - speculators and hedgers. This publication explains how livestock producers can use futures markets to manage price risk. One of these price risk management opportunities is available through futures markets contracts. Livestock producers who are selling products or purchasing inputs can do one of two things when making pricing decisions: accept the market price when they are ready to deliver products or purchase inputs, or reduce input and product price risks by using price risk management tools. In today's farming environment of extreme price volatility and large debt commitments, most livestock producers need the security of one or more of the advantages offered by price risk management. Griffith, Assistant Professor and Extension Marketing Economist, University of TennesseeĪnd John McKissick, Professor Emeritus of Livestock Economics and Marketing, University of Georgia Introduction Curt Lacy, Associate Professor and Extension Economist, University of GeorgiaĪndrew P. Springfield Livestock Marketing Center (Springfield, MO) Hub City Livestock Auction (Aberdeen, SD) Humeston Livestock Exchange (Humeston, IA)Ĭleveland County Agriculture Livestock Exchange (Shelby, NC) OKC West Livestock Market LLC (El Reno, OK) Ozarks Regional Stockyard (West Plains, MO)Ĭentral Livestock Association (Zumbrota, MN)įarmers Stockyards Inc. had doughed by August 6th, compared to 29% last week and 42% last year. The five-year average is 63% CORN PROGRESS: 47% of the corn in the U.S. had set pods by August 6th, compared to 50% last week and 59% last year. The average price for the top 10 steer strings sold on Monday was $246.50 PASTURE CONDITIONS: 38% of the pasture in the United States is rated as good or excellent, compared to 39% last week and 24% last year SPRING WHEAT CONDITION: 41% of the spring wheat crop in the United States is rated as good or excellent, compared to 42% last week and 64% last year SOYBEAN CONDITION: 54% of the soybean crop in the United States is rated as good or excellent, compared to 52% last week and 59% last year CORN CONDITION: 57% of the corn crop in the United States is rated as good or excellent, compared to 55% last week and 58% last yea5 SOYBEAN PROGRESS: 66% of the soybeans in the U.S. The second largest string was 247 heifers (891#) from Worthing, South Dakota at $224.50 NATIONAL STEER TRACKER: The largest steer string sold on Monday on the National Steer Tracker (700-899#) was 288 steers (810#) from Joplin, Missouri at $247.00. Diesel prices up 11 cents this week to $4.24, down $0.75 from last year (Hot temps getting blamed for high prices) NATIONAL CATTLE TRACKER: The largest steer and heifer string sold on Monday was 288 steers (810#) from Joplin, Missouri at $247.00. CATTLE REPORT: 5 out of top 10 calf sales at $300+, new record high in Missouri Cattle slaughter starts week super slow at 116K hd Hot temps getting blamed for high gas prices, seriously? 44 steers (481#) from Kingdom City, Missouri at $333.50 Gas prices up 7 cents this week to $3.83, down $0.21 from last year. ![]()
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