cash settlement, futures, feeder cattle
The change in the feeder cattle futures contract from physical delivery t o cash settlement should not affect a producer's net price for his feeder cattle. For those producers who hedge or use the cash forward contract. the main impact is in the basis. Now, a smaller basis (by about $3) should be used compared to what the producer used prior to cash settlement. Under the old delivery procedure. once a producer used the futures market as a hedge (sold a futures contract), there were two alternatives--either buy back the contract or delivery. If the contract was not "bot" back (offset). delivery was required. Now. if a contract originally sold is not offset, cash settlement is automatic. No further action is required by the user.
Number of Pages
South Dakota State University
Copyright © 1986 South Dakota State University
Murra, Gene, "Cash Settlement for Feeder Cows" (1986). South Dakota Beef Report, 1986. 34.