What are feeder cattle futures?
Feeder cattle futures are CFTC-regulated, exchange-traded contracts on the Chicago Mercantile Exchange (CME). The CME added feeder cattle futures to its livestock products in 1971, and in 1987 the exchange added options on futures on this contract. These tools have enabled cattle producers and feed lot operators to manage their price risk more effectively. Cattle are a valuable commodity for a number of industries including agriculture and in the manufacture of consumer goods like clothing, sporting goods, automobiles, and musical instruments.
The CME's feeder cattle index is a seven-day weighted average of United States Department of Agriculture (USDA) prices from a 12-state region: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, Texas, and Wyoming. Medium #1 and Large #1 feeder steers weighing between 700 and 849 pounds are included in the calculation, except for those identified as fancy, thin, fleshy, gaunt, or full.
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How to trade feeder cattle futures
Feeder cattle futures are traded electronically on the Globex® platform Monday 09:30 a.m. U.S. ET to 2:05 p.m U.S. ET, at 50,000 pounds per contract. An account approved to trade futures is required in order to trade feeder cattle futures.
Feeder cattle futures contract specifications
Considering trading feeder cattle futures? Here are the feeder cattle futures contract specifications.
|Exchange||Chicago Mercantile Exchange, FC|
|Contract Size||50,000 pounds|
|Minimum Tick Size and Value||0.025/cwt (0.025 cents per pound), worth $12.50 per contract.|
|Trading Times||Feeder cattle futures are traded electronically on the Globex® platform Monday from 09:30 a.m. U.S. ET to 2:05 p.m. U.S. ET.|
|Principal Trading Months||Principal trading months for feeder cattle futures and options are January, March, April, May, August, September, October, and November.|
At Schwab, you also get access to advanced trading platforms and education, where you can take advantage of market research, real-time feeder cattle futures quotes, and other specialized tools.
Why trade feeder cattle futures?
Investors can use agricultural products like feeder cattle futures to diversify their portfolio using investments that have a low correlation with their financial assets. Traders can use feeder cattle futures to speculate on the price of young cattle placed on feed lots, which can be affected by a number of factors including overall demand for animal protein and potential shortages due to weather or political events, the change in price of commodities used to feed the animals like corn and soybeans, and even the strength of the U.S. dollar.
It is important to understand the benefits and risks involved with feeder cattle futures before placing a futures trade. Compared to traditional investments, with feeder cattle futures you can trade outside of the traditional market hours associated with equities and take advantage of trading opportunities regardless of market direction. Feeder cattle futures also provide the ability to trade with greater leverage and allow a more efficient use of trading capital. However, trading leveraged products like feeder cattle futures also involves the risk that losses can exceed the amount originally invested and may not be suitable for all investors.
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