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Price protection for the fall

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Brad S
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Price protection for the fall

Postby Brad S » Mon May 01, 2017 4:10 pm

I'm sure everyone is happily aware of the price buildup in fed cattle. Who's thinking of shorting out some protection?

The Chinese market may begin accepting us beef. That alone should be plenty price protection - the way it's working, china is getting Aussie beef that otherwise would be here. The Chinese are now consuming more than 10# and the curve is pretty steep.if/when they eat North American beef, their consumption should really expand. Whether it's Aussie/Brazil or North American, Chinese pull is a true friend to producers, and they may exert sufficient support to protect against the market getting sour.


Feeders have humility - near term higher prices and out term lower prices have producers getting relatively current - as current as cheap corn allows. All the talk of the wall of cattle in the early summer is keeping producers humble. Also, hot hot weather isn't conducive to extra days on feed. Heat and mud get pens current. But if weights back up the market like city drivers in a traffic backup, some advanced sales will look smart.

The scariest boogeyman might be political. I wish trump would stick with "we need trade, now let's get it right."
Of course the economy is fragile and terrorists continue to plot. I'm more worried about the us enonomy.

Corn is below cop, but nobody is cutting back. I see market scares in July as an opportunity to short - corn growers and their mad science are just too prolific.

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Re: Price protection for the fall

Postby RSL » Mon May 01, 2017 5:57 pm

We have hedged a small portion, but will likely continue adding to that position. As well, we are sorting through our current inventory and sending what were going to be grass calves out in the next week or two (A bird in the hand).
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Re: Price protection for the fall

Postby Big Muddy rancher » Mon May 01, 2017 6:30 pm

WE have a price insurance available to us that we can buy, it wasn't very good for 850wt feeders all winter and spring, Thursday it looked like I should buy some but got busy and forgot to get to buy it. Hope tomorrow the charts are as good. I could pretty much lock in what I got last year but the but the insurance is usually back of the market a bit so I would be very happy if I lost my premium and collected from the market.
Some how when you buy it they use the markets to lock in the rate.It is to be self sustaining as not to be countervail-able for NAFTA.
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Brad S
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Re: Price protection for the fall

Postby Brad S » Mon May 01, 2017 7:36 pm

Are you talking about puts for insurance big muddy? I can never justify the cost for puts until after the wreck. Right now, 6 month out at the money (ish) puts are around $7 or ~5%. (Roughly rounded numbers)

I think another workable hedge is being strong enough to hold cattle into the next phase of growership - if you sell calves, hold and grow to yearlings. This is sorta like getting stuck in the mud, sometimes you just get in deeper.


Soapweed spreads out sales and that's pretty savy operation too. I'm thinking like rsl and shorted 2 contracts on grass calves in greenwood county. I hope to sell out before roundup in July.

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Re: Price protection for the fall

Postby 4Diamond » Mon May 01, 2017 8:37 pm

In our country we calve fall and spring. Helps to spread sales around and catch better markets at times. I am nervous this recent runup could plummet any day.

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Re: Price protection for the fall

Postby Big Muddy rancher » Mon May 01, 2017 10:09 pm

Brad S wrote:Are you talking about puts for insurance big muddy? I can never justify the cost for puts until after the wreck. Right now, 6 month out at the money (ish) puts are around $7 or ~5%. (Roughly rounded numbers)

I think another workable hedge is being strong enough to hold cattle into the next phase of growership - if you sell calves, hold and grow to yearlings. This is sorta like getting stuck in the mud, sometimes you just get in deeper.


Soapweed spreads out sales and that's pretty savy operation too. I'm thinking like rsl and shorted 2 contracts on grass calves in greenwood county. I hope to sell out before roundup in July.


We have an industry program called Western Livestock Price Insurance program WLPIP. Run through Crop insurance they use the markets, option, Puts what ever to lock in a price on 850 wt cattle, Fed cattle and calves. It seems it's back out of the markets a bit it will save your ass in a wreck. All winter it was almost $7/100 but the other day it was $4.45/100 for a pretty good return. It changes with the markets and we only have a short window to buy Tuesday thru Thursday.
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Re: Price protection for the fall

Postby Brad S » Mon May 01, 2017 10:50 pm

$4.50/cwt for 6 months time risk seems like a good deal.

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Re: Price protection for the fall

Postby Big Muddy rancher » Tue May 02, 2017 6:39 am

Brad S wrote:$4.50/cwt for 6 months time risk seems like a good deal.


It is not always that cheap and at times for not that great of price but it has paid some when the market really dropped and it can sure help the summer go nicer not worrying about a falling market.
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Re: Price protection for the fall

Postby Brad S » Tue May 02, 2017 7:04 am

Diamond, when do you sell fall calves? Do you push them or try to winter them cheap? Spread out sales (soapweed rule) is plenty smart.


Has everyone been hearing about lab grown meat? Maybe in stores in a few years? At the very least, it has to hurt market psychology.

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Re: Price protection for the fall

Postby 4Diamond » Tue May 02, 2017 8:16 am

A lot of times we back ground fall calves thru the summer and sell big yearlings in December or January. I'm thinking this year of pulling off the cow and selling in late may or early June. My first thought is let grass grow up and then buy cheap calves this fall to blend in with our home raised. This past October was a great time to buy cattle and winter them, everything worked in our favor. Calving twice a year helps spread sales out and makes better use of bulls. I realize not every climate can do this though.

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Re: Price protection for the fall

Postby mrj » Thu May 04, 2017 10:03 am

Brad S wrote:Diamond, when do you sell fall calves? Do you push them or try to winter them cheap? Spread out sales (soapweed rule) is plenty smart.


Has everyone been hearing about lab grown meat? Maybe in stores in a few years? At the very least, it has to hurt market psychology.



I've already forgotten just what is being used to 'create' this man-made, non-animal, so called meat, but seems very counter-productive to the consumer demands for ever more 'natural', additive free food! Wonder what the cost of development will end up being? And how will it fit into the demands for 'sustainability' and 'natural' foods?

Managing marketing is only as wide an opportunity as our weather patterns allow. Drought and quality and quantity of pastures really 'rule' our options here.

mrj

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Re: Price protection for the fall

Postby Brad S » Thu May 04, 2017 6:42 pm

Mrj pretty much nailed it. In a market that descriminates against growing wheat with anhydrous ammonia because it's not all natural, Petrie pork may not meet the market very well. But I worry about the peta save the animal guys.


With a few good years in a row, are you overdue for a drought, or enjoying global warming?


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