Risk Management
Risk Management Information
Using Futures Markets to Manage Price Risk for Feeder Cattle
Regardless of what strategy as a producer you choose to employ, the most important thing is that you consider the price risk that you face. Your situations with regards to financing and self-insurability will dictate how much price risk you will want to bear. Thinking through this, and choosing a strategy that makes sense for you, is becoming increasingly important in today’s highly volatile commodity markets.
Using Futures Markets to Manage Price Risk for Feeder Cattle: Advanced Strategies
The purpose of this publication is to provide an understanding of four advanced strategies that can be used by you to manage the price risk that exists in today’s feeder cattle markets. You are encouraged to familiarize yourself with the basic strategies discussed in AEC 2013-01, as well as the four strategies discussed in this article, in order to better understand the price risk management alternatives you could potentially utilize. All of these strategies have strengths and weaknesses so becoming familiar with them increases the likelihood that you will choose strategies that suit your needs.
Using Futures Markets to Predict Prices and Calculate Breakevens for Feeder Cattle
This publication will show how basis data can be used to move from a futures price to an actual price forecast for feeder cattle in a given location. The ability to use the futures market to predict local prices for different sized calves will be useful to cow-calf, backgrounding, and stocker operations as they try to anticipate likely sale prices for the cattle they sell. The article also illustrates how those expected local prices can be used to estimate breakeven purchase prices for calves. Breakeven analysis will be useful for backgrounders and stocker operators as they make decisions about placing calves into their programs. It is also useful for cow-calf operations as they decide whether to sell or retain their calves at weaning.
Livestock Risk Protection Insurance – USDA Fact Sheet
The USDA Risk Management Agency Feeder Cattle (LRP-Feeder Cattle) is designed to insure against declining market prices. You may choose from a variety of coverage levels and insurance periods that match the time your feeder cattle would normally be marketed. You may choose coverage prices ranging from 70 to 100 percent of the expected ending value. At the end of the insurance period, if the actual ending value is below the coverage price, you will be paid an indemnity for the difference between the coverage price and actual ending value.
Pasture, Rangeland, and Forage (PRF) Insurance - USDA Fact Sheet
The Risk Management Agency’s (RMA) Pasture, Rangeland, Forage (PRF) Pilot Insurance Program is designed to provide insurance coverage on pasture, rangeland, or forage acres. The Pasture, Rangeland, and Forage insurance was designed to help protect a producer’s operation from the risks of forage loss due to the lack of precipitation. It is not designed to insure against ongoing or severe drought, as the coverage is based on precipitation expected during specific intervals only.
