The small contract allows for smaller-scale producers to use futures/options contracts to manage price risk. Additionally, the new stocker futures/options contracts call for 25,000 pounds instead of 50,000 pounds for the feeder cattle contracts. Note that the stocker index trends fairly closely with the feeder index but differs enough that a hedge with stocker futures/options would be more effective than a cross hedge with feeder futures/options. Hedgers that currently use the Feeder Cattle contract to cross hedge their stockers find a substantial amount of difference between the movements of the two prices. ![]() The price relationship between the price index of stocker cattle and feeder cattle is shown (Figure 1). The new 25,000-pound Stocker Cattle contract will allow for better price risk protection than previously available via cross hedging with the Feeder Cattle contract. Before this new contract, stocker cattle operations had to use either the fed (live) cattle or feeder cattle futures or options contacts to cross hedge their price risk. The Chicago Mercantile Exchange now offers a new contract on stocker cattle in addition to the live fed cattle and feeder cattle futures and options contracts. (Print Friendly PDF)Ĭow-calf operators, winter wheat grazers and other cattle operators have a new tool to manage the risk of price changes with stocker cattle. Catlett, Professor, Department of Agricultural Economics & Agricultural Business and Extension Economist College of Agriculture, Consumer and Environmental Sciences New Mexico State University. Using the Stocker Cattle Futures and Options Contracts to Manage Price Risks
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