cattle futures

jhwis

Member
Slightly off topic, but figured some on here would be able to explain it. I understand how cattle futures work for the most part. I know the difference between live cattle contracts and feeder contracts, etc. I see how the traders would make money buying and selling the contracts, but how does it affect the original parties of the contract? A trader can't deliver the cattle when the contract is up. Do they just make sure it is sold before it is due win or lose? Who swoops in last minute and buys the contract then...a feedyard wanting to sell?
 
I've often wondered the same thing. Realistically,how do you buy and sell something that you didn't produce or possess? I'd think the feedyards would be making their own deals with packers.
But,it's like I said at the YT get together last week,it must not take a genius to be a farmer,I've been making a living at it all my life.
 
Yeah, I don't get that part about buying and selling without possessing the cattle. Seems like nobody else does either. I guess that is what happens with all commodities.
 
I'm thinking I'd better take a load of fats Monday before futures tank the sale barn price. They weren't off too bad on the top this week,down fifty cents from the week before,$2.50 from the week before that. I sold every week in January,but none in February. I wanted to get a few more pounds on some,but if things keep going this way,I'd have been better off selling them a little light.
 

Hi:

What a fun topic. I am not smart enough to make a living at farming and I am only smart enough to lose money on the stock market. Both, though, are fun to be involved in.

For what it is worth this is how it works.

I have something to sell at some point in the future and put in on the market today contractually. You buy my contract with the understanding that you will get the item in the future. Not wanting to wait you sell the contract to someone else who actually gives you more than the orginal contracted price. You the buyer made a profit on something you never had. This might happen a few more times until the point were I am now ready to deliver the product I had committed to sell. Trouble is the market has tanked and the buyer of the contract must take delivery of a product which is worth less than they paid for. Thats what I do to make a loss.

So back to farming where I know I will not make a living but oh what fun it is.
 
Good explanation. In the cattle futures...who would be the original parties in a contract? a
feedlot and a cow/calf operator?
 

Hi:

Could be either and also many farmers I know sell crops (canola, wheat, corn, etc) that way. Any one can do futures (stock market in general), it is just another form of gambling.
 
(quoted from post at 17:30:14 02/28/20)
Hi:

Could be either and also many farmers I know sell crops (canola, wheat, corn, etc) that way. Any one can do futures (stock market in general), it is just another form of gambling.

I know of a farmer that went on his butt doing that.
 
What about futures options? Options are on the underlying futures contracts but I don't quite get what the options are. I heard a radio ad from one of the trading outfits and called. Talked to the guy for half an hour. He stressed how I much could "make" on trades and my loss on any contract would be only $5000. Seemed more like a bet. I told him it's not for me.
 

We sell tractor parts! We have the parts you need to repair your tractor - the right parts. Our low prices and years of research make us your best choice when you need parts. Shop Online Today.

Back
Top