![]() ![]() ![]() Just a decade ago roughly 55 percent of all cattle sales in the United States took place in stockyards and sales barns. The problem is that fewer and fewer cattle sales transactions are taking place in the cash market. This is the cornerstone of all cattle futures trading. Department of Agriculture, which then compiles daily reports on the overall volume and cost of cattle sold in the United States. ![]() “Primarily what the public looks at, and what our futures market looks to, are the transactions that are occurring today or in the next week or so,” Lehman said.īy law, those cash market sales must be immediately reported to the U.S. This is the cornerstone upon which cattle futures trading is based. This refers to the daily sale of cattle in stockyards and sales barns all across the country, where buyers and sellers meet, examine the cattle, evaluate their value and negotiate for an agreed upon price for immediate delivery. The underlying foundation of the futures market is the cash market (also referred to as the “spot” or “physical” market). “When you look at our futures prices, they are attempting to predict what the price of the cash market will be.” “The futures market provides a tool for discovering what future prices are,” Lehman said. These “futures contracts” are also tradable, allowing any party to buy or sell the contract hoping to gain a financial advantage as market prices move up or down over time. The arrangement provides both parties with some protection against sudden price swings, and making it easier to plan for the future knowing they can count on a guaranteed price within any given market period. In a futures contract, both parties initially agree to buy and sell cattle at a price agreed upon today (the forward price) with delivery and payment occurring at a future point (the delivery date). The cattle futures trade offers a tool by which the producer the rancher and feedlot operator, and the buyer the slaughter and packing houses, can hedge their bets. In the cattle industry, where the time gap between when a calf is born and when that animal is ready for slaughter frequently extends beyond a year and a half, dramatic shifts in the market make it difficult for either buyer or seller to know what their investment is truly worth. Price fluctuations are an accepted part of all commodity trading platforms, but sudden and dramatic changes in price (volatility) equals uncertainty. Lehman spoke with the Tribune about volatility in the nation’s cattle markets on Aug. “Is $1.15 to $1.20 the new low, or will we stabilize here?” he added. ![]()
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