A T-account in the table below for a feedlot that places feeder cattle on feed in September.
Question:
A T-account in the table below for a feedlot that places feeder cattle on feed in September. Use the information in Table 8.1 (or the CME Group's website) to determine the appropriate futures contract expiration month for this feedlot. Also use the T-accounts in Figure 8.6 as a guide.
• Beginning of the planning period (September): The appropriate futures contract is trading at $130.00 per cwt when the cattle are placed in September.
• End of the planning period (January): The cattle are finished and ready to be sold. The spot price the cattle will receive is $120.00 per cwt. The appropriate futures contract is trading at $118.00 per cwt.
Spot (Cash) Market | Futures Market | |
September (place cattle on feed) | Futures contract at $130.00 per cwt | |
A | ||
B | ||
January (live cattle finished) | Sell live cattle to packer at $120.00 per cwt | Futures contract at $118.00 per cwt |
C | ||
D |
Canadian Business & the Law
ISBN: 978-0176501624
4th edition
Authors: Dorothy DuPlessis, Shannnon o'Byrne, Steven Enman, Sally Gunz