Pricing calves using futures

[kfournier]

I realize this forum is mainly grain so hope this message is not out of place. Was wanting to lock in some prices for calves for the fall of 2000 using the futures since the prices seem to be very favourable now. Live cattle futures on the CME are trading October 2000 but feeder futures are only trading August 2000. When do the feeder futures start trading for October and November 2000? Since the two live and feeder contracts trade fairly closely does it matter which one I would use? Would using the feeder contract give me better coverage if the price of feed increases over the next year? One last concern would be how to go about locking in the Cdn $ as the Cdn $ contract is somewhat bigger than a cattle contract.

[jeeves]

You may want to consider using a deferred delivery contract for your fall 2000 calves. The advantages are that you don't have to worry about the currency and will not be required to post margin. One disadvantage of using the CME feeder cattle future is that it has very low open interest (number of contracts being traded). The CME has recently introduced a stocker cattle contract, however, it has very low participation so far.

[melvill]

Actually this forum isn't just for grains and oilseeds although that's mostly how it's used. There is an alternative to using CME Feeder Futures. A number of buyers and buyer's agents in Western Canada are now offering forward contracts for calves as well as backgrounded cattle and slaughter animals. Fire up your Web browser and point it to http://http://www.agric.gov.ab.ca/newsletters/market_clippings/index.html . When you get there click on 'Businesses and Individuals Forward Contracting Cattle in Western Canada.' That'll give you a pretty comprehensive list of contracts and what to watch for.