Is the term ” feeder cattle futures ” tripping you up? We wouldn’t blame you. As far as the investing world goes, this is one of the more exotic terms. Some of the terms almost certainly seem familiar to most investors. We all know what cattle are, they’re just cows. Futures contracts are familiar to many investors too. We’ll get into these contracts a bit later in case you’re not familiar. Feeder, meanwhile, means food you feed to livestock and other animals. Not so hard to understand individually, but add them all together and it can be a bit confusing.
So what does it mean when you add all the terms up to mean feeder cattle futures? Well let’s start by talking about the last term, “futures”, as this might be the least familiar, or more harder to comprehend term. Futures are contracts in which a buyer and seller agree upon a price in the present, and exchange money in the present. The seller, however, does not deliver the goods, until a future date.
Still confused? Think about it this way. Let’s say a farmer needs to sell some rice in order to raise funds to pay for farming equipment. Meanwhile, a food processor needs to ensure future delivery of rice in order to make rice cakes. In this case, the farmer can offer to sell his future rice crops to the food processor. The food processor, in turn, can give the farmer money and ensure future delivery. Both parties benefit.
When it comes to cme feeder cattle futures, buyers and sellers are agreeing upon the sale and delivery of cattle, and in this case specifically feeder cattle. Feeder cattle are weaned, young cattle (usually called calves). Normally, people and companies buy these cattle so that they can be fattened, and then slaughtered. In general, feeder cattle are delivered weighing around 600 to 800 pounds, and are normally fattened up to weigh 1,000 to 1,200 pounds.
After that? Well, unfortunately for the cattle, they are sent to the slaughterhouse. Then some time later the cattle are processed and eventually end up on our plates or used for another purpose. An unfortunate end for the cattle. However, for the “cowboys” who raise the cattle and the processors who process them, it’s a chance to earn a living.
Cattle futures offer a great opportunity for investors to turn a profit too. While newer investors often think in terms of stocks, commodities and futures are also a great option. Futures markets create speculation because prices can rise and fall before the commodity itself (in this case calves) are delivered. This means that buyers and sellers can “bet” on which way markets will go, and can sell/buy their goods based on these bets.
The Nuts and Bolts Of Investing In Feeder Cattle Futures
So how do you actually invest in futures? Through financial markets, of course! In the United States, traders sell most commodity based futures, such as cattle, via the Chicago Mercantile Exchange, or CME. The CME is the United States’ largest commodity futures market. Long story short, Chicago has an extensive history as the destination of cattle grown and raised in Texas, Oklahoma, and elsewhere. Back in the day cowboys would drive herds of cattle north to the slaughterhouses in Chicago. The meat would be processed, and then using the Great Lakes, Mississippi, and other routes, the meat would be shipped across the country.
Wondering how you can invest in cattle futures and actually produce profits? We recommend reading the news and following economic trends. Predicting which way the feeder cattle futures market will go is difficult. By paying attention to trends, you may be able to uncover key insights. In order to uncover these trends, it’s important to follow feeder cattle future news. This economic news and data will help provide you with key insights.
Things to Watch Out for When Investing In Feeder Cattle Futures
What are some things you should pay attention to when studying cattle futures data? Most cattle is culled so that it can be consumed. So trends concerning consumption are ultimately among the most important things you to consider. Is a popular fast food burger chain launching a major expansion? If so, it’s possible that this expansion will increase the consumption of beef. And if that happens, beef prices will rise. Remember, demand has a major impact on prices. Looking at these sorts of mega-trends can be the trick to unlocking the potential of markets.
Investing in futures is a great option for people who don’t want to dig into the messy details of individual companies and stocks. With futures you can focus on trends, which some people find easier to anticipate and predict. At the very least, futures offer an excellent way to diversify your portfolio. No portfolio should focus exclusively on stocks. Futures, options, bonds, commodities, and other financial assets should also be thrown into the mix.