Hedging Feeder Cattle in the Texas Panhandle


  • James Davis
  • Emmett Elam


feeder cattle, hedging, futures, basis, hedging risk


Feeder cattle producers have traditionally hedged their cattle on a one-to-one basis, that is one pound offutures is used to hedge one pound of expected production. This paper deals with the situation where the producer needs to hedge off-weight steers and heifers. Because the feeder cattle futures prices reflect the prices of 600-800 pound feeder steers, the prices of the feeder cattle futures contract do not change in the same dollar amounts as do the prices of the off-weight steers and heifers. In this situation, a cross hedge should be used. In order to reduce hedging risk when cross hedging, a hedge ratio must be estimated. Tables showing hedge ratios and hedging risk for various weights of Texas Panhandle steers and heifers are presented in the paper.




How to Cite

Davis, J., & Elam, E. (2016). Hedging Feeder Cattle in the Texas Panhandle. Texas Journal of Agriculture and Natural Resources, 4, 2–8. Retrieved from https://txjanr.agintexas.org/index.php/txjanr/article/view/336



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