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Price Risk Management Tools

By Dr. Andrew Griffith
 
A couple of questions have come up recently about price risk management tools and how certain tools can be used in cattle operations. The simple answer to this question is there is Livestock Risk Protection insurance for any size operation, futures contracts for operations that can either fill a 50,000 pound feeder cattle contract or a 40,000 pound live cattle contract, and then there are forward contracts if they can be had.
 
For small cattle producers, there are no good price risk management tools worth using or worth the cost of the insurance. That does not mean there are not some local opportunities when working with an individual, but those opportunities are few and far between. Even though futures and options are not conducive to the little man, it is still advantageous for a producer to educate him or herself on the subject. This information may become useful when finding alternative methods to price cattle.