The beef cycle begins with the cow-calf operation, which breeds the new calves. Most ranchers breed their herds of cows in summer, thus producing the new crop of calves in spring (the gestation period is about nine months). This allows the calves to be born during the milder weather of spring and provides the calves with ample forage through the summer and early autumn. The calves are weaned from the mother after six to eight months and then usually spend six to ten months in the stocker operation, growing to near full-sized. When the cattle reach 600-800 pounds, they are typically sent to a feedlot and become “feeder cattle.”
In the feedlot, the cattle are fed a special food mix to encourage rapid weight gain. The animal is considered “finished” when it reaches full weight and is ready for slaughter, typically at around 1,200 pounds, which produces a dressed carcass of around 745 pounds. After reaching full weight, the cattle are sold for slaughter to a meat packing plant.
When dealing with beef prices, it is important to understand both the supply and demand influences. The factors among the supply side are the production cost (such as cost of feed) and weather. The factors among the demand side are personal income, price changes in alternatives meats such as pork and chicken, and population increases. The cattle industry is periodically impacted by Bovine Spongiform Encephalopathy (BSE), also known as Mad Cow Disease. Outbreaks can lead to bans on imports and exports from various countries.
Feeder Cattle futures provide a way to engage in price discovery for cattle to be placed in feed yards for fattening, participate in a market in which prices are influenced by factors that affect both feed grain and feeder cattle prices, and effectively manage the price risk that merchandisers, producers, processors and others have related to the purchase or sale of feeder cattle.
The futures contract trades on Globex, the CME Group’s electronic exchange. The market opens at 8:30 AM CT and closes at 1:05 PM CT, Monday through Friday. There are periodic Cattle on Feed reports that are released typically Friday’s at 2:00 PM CT.
One Feeder Cattle futures contract is 50,000 pounds or approximately 23 metric tons. The previous settlement price (September 10, 2012) for October 2012 Feeder Cattle futures was 146.575 or $73,287.50 per contract. The most common contract symbol is GF.
One futures contract price increment is $.00025 per pound. A one “tick” move is $12.50. The next tick after 146.575 upward is 146.600, followed by 146.625. Therefore, a price move, from 146.575 to 147.575, is $500.
The performance bond or initial margin requirement to initiate one futures contract position is $2,750 (as of November 11, 2015). To control that futures position going forward the maintenance margin becomes $2,500 (as of November 11, 2015).
The Daily Price limit is $.0450 per pound above or below the previous day’s settlement price. For example, the Daily Price Limit to the upside for the Tuesday, September 11 trading session would be 151.75. The daily limit price is $0.0675 if the market once again closes at the limit.
The futures contract month listings are January (F), March (H), April (J), May (K), August (Q), September (U), October (V), and November (X).
The futures contract’s Last Trading Day (LTD) is the last Thursday of the contract month. The October 2012 Feeder Cattle futures contract LTD is October 25, 2012 for example.
Visit our Markets section for additional contract specifications and market information regarding the Feeder Cattle futures market.
*Source cmegroup.com
*Source BAR CHART
Risk Disclosure
THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.
THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.
TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.
YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.
GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.
