marketing alternatives, futures, options
Four alternative marketing strategies were evaluated for cattle placed in the South Dakota Retained Ownership Program on October 13, 1993. The strategies were 1) cash marketing only, 2) a futures hedge, 3) a put option, and 4) an options "fence." Each of these market alternatives were described and expected net prices were determined. The actual net prices from using each of these strategies were calculated for three different marketing periods. For steers marketed in April, the cash only alternative provided the highest net price. The options "fence" net price was only $.20/cwt to $.25/cwt lower than the cash price. However, for the steers marketed in June, the futures hedge provided the highest net price. There is not one "best" marketing strategy to follow. Each producer needs to evaluate their attitudes toward price risk and select the marketing strategy that "best" fits their goals and situation.
Number of Pages
South Dakota State University
Copyright © 1994 South Dakota State University.
Feuz, Dillion M., "Use of Futures and Options in a Retained Ownership Program" (1994). South Dakota Beef Report, 1994. 20.