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Futures market

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Hopeful Rancher

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Does any one know why the futures for feeders and live cattle continued with its recent past and took a big dive today?
 

porkchop

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Don't forget the down trend was changed by a "Govt." grain report.
You may also want to look at what has happened to demand. There are too many answers to your question. IMO just when you think you got the futures mkt figured out is just about the time you really get it handed to you! Good Luck!
 

Hopeful Rancher

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Now this is just my perception but I thought the cash market was really slow to respond to the futures. Is Futures like the stock market, suppose to be predicting 6 months out?
 

porkchop

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Not necessarily, the futures price you see quoted on the board are usually the bid or ask price of a contract (50,000lbs) of feeder cattle for example, for the delivery month that is quoted. Think of the board as a big auction. The prices quoted are actually on cattle being sold in that instant and delivered at some time in the future. Because the cattle are being traded now it is not necessarily a good predictor of price. Let’s just say for example you have some fall calves you want to feed till August then sell to a feed yard. This am Aug feeders were trading for 148.52, The Cash price is around 139.00 You feel like cattle will continue to decline in price so you sell your feeders on the board for Aug delivery for 148.52. Now lets fast-forward to August. It’s time to deliver those calves, now the August futures price is 136.52. You sure are glad you sold those calves in April; you buy back the contract and pocket the 12.00/cwt. The Board was a tool you used, not a predictor of price.
 

4Diamond

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porkchop said:
Not necessarily, the futures price you see quoted on the board are usually the bid or ask price of a contract (50,000lbs) of feeder cattle for example, for the delivery month that is quoted. Think of the board as a big auction. The prices quoted are actually on cattle being sold in that instant and delivered at some time in the future. Because the cattle are being traded now it is not necessarily a good predictor of price. Let’s just say for example you have some fall calves you want to feed till August then sell to a feed yard. This am Aug feeders were trading for 148.52, The Cash price is around 139.00 You feel like cattle will continue to decline in price so you sell your feeders on the board for Aug delivery for 148.52. Now lets fast-forward to August. It’s time to deliver those calves, now the August futures price is 136.52. You sure are glad you sold those calves in April; you buy back the contract and pocket the 12.00/cwt. The Board was a tool you used, not a predictor of price.

And a way for investors to dictate our market and play with paper..
 

Jake

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4Diamond said:
porkchop said:
Not necessarily, the futures price you see quoted on the board are usually the bid or ask price of a contract (50,000lbs) of feeder cattle for example, for the delivery month that is quoted. Think of the board as a big auction. The prices quoted are actually on cattle being sold in that instant and delivered at some time in the future. Because the cattle are being traded now it is not necessarily a good predictor of price. Let’s just say for example you have some fall calves you want to feed till August then sell to a feed yard. This am Aug feeders were trading for 148.52, The Cash price is around 139.00 You feel like cattle will continue to decline in price so you sell your feeders on the board for Aug delivery for 148.52. Now lets fast-forward to August. It’s time to deliver those calves, now the August futures price is 136.52. You sure are glad you sold those calves in April; you buy back the contract and pocket the 12.00/cwt. The Board was a tool you used, not a predictor of price.

And a way for investors to dictate our market and play with paper..

The positive of the speculators in the markets is that it helps with liquidity in the market. The large hedge funds in the corn, wheat and beans have mroe influence on over running price moves either up or down. But luckily they have fairly well kept their money out of the meat markets in comparison the grains.
 

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