Early November is not a time when many cattlemen consider selling calves for next summer or fall. Perhaps this year they should. The following chart depicts the CME Feeder Cattle futures closes for November 10, 2011. By reviewing the chart cattlemen should be able to see that favorable prices are projected for most of next year.
By using futures and/or options, cattlemen who market in truck-load lots could manage some or all of their sales price risk for next year. By using historical basis estimates we can predict with considerable confidence that 500-600 pound steers in the Southeastern US will bring $0-$5/Cwt. more than the futures price while 700-800 pound steers will bring approximately $10-$15/Cwt. less than the appropriate futures price.
Based on this information, it is quite possible that cattlemen with calves to sell next August and September could “lock-in” $150-$155/Cwt. for 500-600 pound steers and $135-$140/cwt. for 700-800 pound steers. While the current supply and demand fundamentals certainly support these prices or perhaps even higher prices next year, it may be a good idea to have at least some of next year’s required revenues “guaranteed” just in case the market does break.
Cattle producers or others who are unsure of how to use futures and options to manage their price risk should contact their local county agent or the Southeast Cattle Advisor at firstname.lastname@example.org.