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Understanding Feeder Cattle Contracts

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Category: Commodity

Feeder cattle are weaned calves that have been raised to a sure weight after which despatched to feedlots to be fattened earlier than they're slaughtered. On average, three to four months is required to fatten the cattle from a starting weight of 600-800 pounds to the specified completed weight of 1,000-1,300 pounds.

 Raising cattle for beef consumption happens throughout the world. Roughly 1.three billion heads of cattle are currently being raised worldwide, with no decrease in sight. The variety of cattle brought into feedlots gives the most effective estimation of whether the close to future will produce a glut or a scarcity of live cattle.

Understanding Feeder Cattle Contracts

Like each commodity, feeder cattle has its own ticker symbol, contract value and margin requirements. To efficiently commerce a commodity, you must be aware of these key components and understand find out how to use them to calculate your potential incomeand loss.

This is rather like saying "Feeder Cattle (FC) 2008 (8) Mar (H) at $107.950 per hundred weight (cwt) (107.950)." A dealer buys or sells a feeder cattle contract in accordance with this sort of quotation.

 

Commodities are traded based on margin, and the margin adjustments primarily based on market volatility and the present face value of the contract. To commerce a feeder cattle contract on the Chicago Mercantile Alternate (CME) requires a margin of $1,350, which is roughly 3% of the face value.
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