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Fed Cattle Market Simulator or Packer-Feeder Game. Department of Agricultural Economics Oklahoma State University. Historical Perspective. Began in 1991 Developers – Stephen Koontz, Derrell Peel, James Trapp, Clement Ward, all at OSU - PowerPoint PPT Presentation
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FED CATTLEMARKET SIMULATOR
Fed Cattle Market Simulatoror
Packer-Feeder Game
Department of Agricultural Economics
Oklahoma State University
FED CATTLEMARKET SIMULATOR
Historical Perspective
Began in 1991 Developers – Stephen Koontz, Derrell Peel,
James Trapp, Clement Ward, all at OSU Used in all three Land Grant University missions:
teaching, extension, and research
Current Facilitators – Derrell Peel, Kellie Raper, Clement Ward, all at OSU
FED CATTLEMARKET SIMULATOR
Acknowledgements
Development would not have been possible without grant support from ..Two Higher Education Challenge Grants
through CSREES-U.S. Department of Agriculture
Chicago Mercantile Exchange
FED CATTLEMARKET SIMULATOR
National Cattlemens’sBeef Association (NCBA)Agribusiness EmployeeCross-TrainingProducers, Students,Youth, Other
NCBA
NCBA
NCBA
NCBA 2
15
222
36
914
6
10
6
3
NCBA
5
2
NCBA
NCBA
Alberta Saskatchewan2
Workshop Locations, 1991-2007
FED CATTLEMARKET SIMULATOR
Simulator Structure
Cattle Feedlots1 2 3 4
8765
Live CattleFutures Market
Market News Services
(Public Information)
1 2
3 4
Slaughter CattlePrice Negotiation
Slaughter CattleFinancial Records
Feeder CattlePlacements
# and Typeof Trades
Price of FuturesContracts
Trade Futures
Financial Records # & Price ofPens Traded
Weekly Boxed Beef Price and Slaughter Price and Slaughter Volume
Meatpackers
FED CATTLEMARKET SIMULATOR
Simulator Overview Eight feedlot teams market pens of fed cattle to four
meatpacking teams Each team’s objective is to earn a profit
One pen = 100 head of steers Cattle are of 3 genetic types:
low (low quality grade, high yielding) medium high (high quality grade, low yielding)
Cattle supplies cycle from larger to smaller to larger supplies
FED CATTLEMARKET SIMULATOR
Overview continued Feedlot and packer teams negotiate prices in 6-8 minute
trading weeks Teams can trade futures market contracts (one nearby
and two distant contracts) Weekly reports received by teams
Current (within-week) Market News reports and end-of-week market summaries
Profit/loss Statements Cattle on Feed Report
Every 4 weeks
FED CATTLEMARKET SIMULATOR
Overview continued Cattle can be sold/bought from a show list anytime
during a 5-week market window at weights from 1200-1300 lbs
Cattle at lighter weights can be forward contracted Cattle can be priced on a live weight, dressed weight, or
grid method Feedlots are penalized for feeding to excessive weights Each packer has a different cost structure and minimum
cost volume
FED CATTLEMARKET SIMULATOR
Introduction and Mechanics
FED CATTLEMARKET SIMULATORClick tab for
cash market transactions
Indicates current trading week and time remaining
Cattle currently available for
sale and delivery
Pen status shows weeks
until optimal sale weight, genetic
type, current weight and sale
status
FED CATTLEMARKET SIMULATOR
Click to offer cattle
for sale
Use call buttons to
allow packers to view showlist
“Boot” packers out to
restrict access to showlist
Bid dialog box; accept bids (green); reject bids
(red) or counteroffer
(blue)
FED CATTLEMARKET SIMULATORClick tab to
trade futures Click tab for market and
financial summaries
Cattle pending for showlist;
can be forward contracted for delivery after 1200 pounds Click to
forward contract cattle
Current market
information
FED CATTLEMARKET SIMULATOR
Indicates # of pens
bought/needed
Indicates current feedlot
information displayed
Click tab to view feedlot
showlist
Current trading week and time
remaining
FED CATTLEMARKET SIMULATOR
Highlight pen to make bid or accept offer
Make bids, accept offers or cancel bids
Click to leave current feedlot
Each row indicates a pen of cattle, genetic type, current weight and sales status
FED CATTLEMARKET SIMULATORClick tab to view
current purchases
Click tab to view pending contracts Click tab
to trade futures
Click tab to view market
information
FED CATTLEMARKET SIMULATOR
Packer 4 – Weekly Financial Report – Week 3
FED CATTLEMARKET SIMULATOR
Packer 1 – Weekly Market Summary – Week 4
FED CATTLEMARKET SIMULATOR
Feeder 7 – Weekly Financial Report – Week 2
FED CATTLEMARKET SIMULATOR
Feeder 1 – Weekly Market Summary – Week 4
FED CATTLEMARKET SIMULATOR
Monthly Cattle on Feed Report – Week 4
FED CATTLEMARKET SIMULATOR
Feedlot Economics
FED CATTLEMARKET SIMULATOR
Example Breakeven Price for1250 lbs Fed Cattle
STEP 1: Calculate Total Cost of Gain(Out Weight - In Weight) x $/lb.(1250 - 700 lbs) x $0.474/lb. =
$260.15/headSTEP 2: Calculate Total Feeder Cost
700 lbs x $98.71/cwt. = $690.97/head
STEP 3: Convert to Slaughter Weight(Step 1 + Step 2) / 1250 lbs =
$76.09/cwt.
FED CATTLEMARKET SIMULATOR
Example Breakeven Price for1275 and 1300 lb Fed Cattle
STEP 1 for 1275 lb cattle: Calculate Total Cost of Gain(Out Weight - In Weight) x $/lb. x 1.08
STEP 3: Convert to Slaughter Weight(Step 1 + Step 2)/ 1275 lbs
STEP 1 for 1300 lb cattle: Calculate Total Cost of Gain(Out Weight - In Weight) x $/lb. x 1.18
STEP 3: Convert to Slaughter Weight(Step 1 + Step 2)/ 1300 lbs
FED CATTLEMARKET SIMULATOR
Estimated Feedlot Breakeven Prices (Medium Genetic Type, 1250 pounds)
Trading Round
Round Pen
PlacedPlacement
Price
Average Cost of
Gain
Current Placement
Price
Current Cost of
Gain
Feeder Breakeven
Price1 -21 99.09 0.45 106.79 0.45 75.292 -20 98.39 0.45 103.40 0.45 74.903 -19 98.39 0.45 100.59 0.45 74.904 -18 99.79 0.45 98.84 0.46 75.685 -17 102.25 0.45 98.01 0.46 77.066 -16 105.41 0.45 97.76 0.46 78.837 -15 109.27 0.45 98.91 0.47 80.998 -14 113.49 0.46 101.12 0.47 83.799 -13 117.70 0.46 104.03 0.47 86.15
10 -12 121.92 0.46 107.64 0.47 88.52
FED CATTLEMARKET SIMULATOR
Feedlot Breakeven Prices:Weight and Market Effects
Slaughter weight1200 1225 1250 1275 1300
Sideways feeder marketBreakeven price 81.88 81.17 80.48 81.52 83.10Difference from 1250 lbs -1.40 -0.69 0.00 1.04 2.62Rising feeder marketBreakeven price 78.26 79.23 80.48 83.77 87.50Difference from 1250 lbs 2.22 1.25 0.00 3.29 7.02Falling feeder marketBreakeven price 86.65 83.50 80.48 79.66 79.76Difference from 1250 lbs -6.17 -3.02 0.00 -0.82 -0.72
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Placement pens and prices
0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
Trading round
Num
ber o
f pen
s
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
Pric
e ($
/cw
t)
Current placement quantity Current placement quantity
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Feeder cattle demand
80.00
90.00
100.00
110.00
120.00
130.00
140.00
30 35 40 45 50
Number of pens
Feed
er c
attle
pric
e ($
/cw
t)
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Feeder breakeven price
70.00
75.00
80.00
85.00
90.00
95.00
100.00
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49
Trading round
$/cw
t
Feeder breakeven price
FED CATTLEMARKET SIMULATOR
Feedlot Breakeven Slaughter Price Table(Medium Genetic Type, 1250 pounds)
Average Cost of Gain Feeder cattle (c/lb)
Price ($/cwt) 0.45 0.46 0.47 0.48 0.4995.00 73.00 73.44 73.88 74.32 74.7696.00 73.56 74.00 74.44 74.88 75.3297.00 74.12 74.56 75.00 75.44 75.8898.00 74.68 75.12 75.56 76.00 76.4499.00 75.24 75.68 76.12 76.56 77.00
100.00 75.80 76.24 76.68 77.12 77.56
101.00 76.36 76.80 77.24 77.68 78.12102.00 76.92 77.36 77.80 78.24 78.68103.00 77.48 77.92 78.36 78.80 79.24104.00 78.04 78.48 78.92 79.36 79.80105.00 78.60 79.04 79.48 79.92 80.36
FED CATTLEMARKET SIMULATOR
Packer Economics
FED CATTLEMARKET SIMULATOR
Packer Decisions
Decide how many pens of fed cattle to buy each week
Determine how much to pay for cattle of different genetic types and what pricing method to use
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Packer average total cost functions
0
50
100
150
200
250
300
350
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Number of pens
Cos
t per
hea
d ($
)
Packer 1 Packer 2 Packer 3 Packer 4
FED CATTLEMARKET SIMULATOR
0123456789
101112131415
PensSlaughtered
$95,625.00$324.10/head
173.26122.99109.58
98.4588.4879.8672.8067.5164.1963.0364.2568.0574.6384.20
AverageVariable Costs
Cost Schedule for Plant X
FED CATTLEMARKET SIMULATOR
STEP 1: Compute Adjusted Boxed Beef PriceProjected Boxed Beef Price (Ch 1-3, 700-850) $120.00Less Discounts:
% Select x $ Discount (48% x $10) -$4.80
% YG4-5 x $ Discount ( 4% x $15) -$0.60
% Light/Heavy X $ Discount ( 0% x $10) -$0.00
Sum for Adjusted Boxed Beef Price $114.60
STEP 2: Convert Boxed Beef Price to Live WeightAdjusted Price x Dress % ($114.60 x 63%) $72.20
STEP 3: Add Byproducts ValueSTEP 2 + $8.50/live cwt. ($72.20 + $8.50)
$80.70
STEP 4: Subtract Slaughtering-Processing CostSTEP 3 - $75.00/Head / Live cwt. [$80.70 – ($75.00 / 12.5)] $74.70
Live Weight Bid Price = $74.70/cwt.
Breakeven Live Weight Bid Price(Medium Genetic Type, 1250 lbs)
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Boxed beef demand
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
160.00
30 32 34 36 38 40 42 44 46 48 50
Trading round
Pric
e ($
/cw
t)
FED CATTLEMARKET SIMULATOR
Carcass Characteristics by Weight: Medium Genetic Type
Live Weight
Dressing Percent
Carcass Weight
Percent Prime
Percent Choice
Percent Select
Percent YG 1-2
Percent YG 3
Percent YG 4-5
Percent Light or Heavy
1200 62.0 744 3 35 62 70 30 0 31225 62.5 766 5 40 55 63 35 2 11250 63.0 788 7 45 48 57 39 4 01275 63.5 810 9 50 41 51 43 6 11300 64.0 832 11 55 34 45 47 8 3
FED CATTLEMARKET SIMULATOR
Breakeven Prices for Packer X (Assumes optimal # of pens)
Slaughter cost
($/hd)
Boxed beef price
($/cwt)
Slaughter weight, Medium genetic type
1200 1225 1250 1275 130063.03 115.00 70.52 71.54 72.51 68.20 67.2063.03 116.00 71.14 72.17 73.14 68.83 67.8463.03 117.00 71.76 72.79 73.77 69.47 68.4863.03 118.00 72.38 73.42 74.40 70.10 69.1263.03 119.00 73.00 74.04 75.03 70.74 69.7663.03 120.00 73.62 74.67 75.66 71.37 70.4063.03 121.00 74.24 75.29 76.29 72.01 71.0463.03 122.00 74.86 75.92 76.92 72.64 71.6863.03 123.00 75.48 76.54 77.55 73.28 72.3263.03 124.00 76.10 77.17 78.18 73.91 72.9663.03 125.00 76.72 77.79 78.81 74.55 73.60
FED CATTLEMARKET SIMULATOR
Breakeven Carcass Weight Bid Price(Medium Genetic Type, 1250 pounds)
STEP 1: Compute Adjusted Boxed Beef PriceProjected Boxed Beef Price (Ch 1-3, 700-850) $120.00Less Discounts:% Select x $ Discount (48% x $10)
-$4.80% YG4-5 x $ Discount ( 4% x $15)
-$0.60% Light/Heavy X $ Discount ( 0% x $10) -$0.00
Sum for Adjusted Boxed Beef Price $114.60
STEP 2: Add Byproducts Value (on a dressed weight basis)STEP 1 + Byproducts Price/live cwt. / Dress %
[$114.60 + ($8.50/0.63)]$128.09
STEP 3: Subtract Slaughter-Processing Costs (on a dressed weight basis)STEP 2 - $75.00/Head / Dressed weight [$128.09 - ($75.00 / 7.88)] $118.57
Dressed Weight Bid Price = $118.57/cwt.
FED CATTLEMARKET SIMULATOR
Live Weight to Dressed Weight Conversion($/cwt.)
Medium genetic typeLive weight price Dressed weight price
1225 1250 1275 1225 1250 127585.00 85.00 85.00 136.00 134.92 133.8685.50 85.50 85.50 136.80 135.71 134.6586.00 86.00 86.00 137.60 136.51 135.4386.50 86.50 86.50 138.40 137.30 136.2287.00 87.00 87.00 139.20 138.10 137.0187.50 87.50 87.50 140.00 138.89 137.8088.00 88.00 88.00 140.80 139.68 138.58
88.50 88.50 88.50 141.60 140.48 139.3789.00 89.00 89.00 142.40 141.27 140.1689.50 89.50 89.50 143.20 142.06 140.94
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Packer profit-price relationship
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47
Trading week
Pric
e ($
/cw
t)
-150.00
-100.00
-50.00
0.00
50.00
100.00
150.00
200.00
Prof
it ($
/hea
d)
Live price Packer profit/head
FED CATTLEMARKET SIMULATOR
Joint Profits to Split
75.00
76.00
77.00
78.00
79.00
80.00
81.00
82.00
83.00
1200 1225 1250 1275 1300
Weight (lbs)
Pric
e ($
/cw
t)
Feeder Breakeven Packer Breakeven
FED CATTLEMARKET SIMULATOR
Joint Losses to Split
75.00
76.00
77.00
78.00
79.00
80.00
81.00
82.00
83.00
1200 1225 1250 1275 1300
Weight (lbs)
Pric
e ($
/cw
t)
Feeder Breakeven Packer Breakeven
FED CATTLEMARKET SIMULATOR
Grid Pricing
FED CATTLEMARKET SIMULATOR
What Is Grid Pricing?
Grid pricing involves combining a base price and premiums-discounts for individual carcass characteristics
FED CATTLEMARKET SIMULATOR
Grid Pricing Formula
Base pricePlus (minus) each premium (discount) cell
times the percent of carcasses in each respective cell of the carcass distribution matrix
FED CATTLEMARKET SIMULATOR
Sample Premium-Discount Grid ($/carcass cwt.)
Sample grid
Base price – Choice YG2-3 700-850 lbs ($/dressed cwt) $120.00
Premiums and DiscountsPrime +8.00Select -10.00YG 1 +4.00YG 4-5 -15.00Light carcasses -10.00Heavy carcasses -10.00
FED CATTLEMARKET SIMULATOR
Grid in Matrix Form($/carcass cwt.)
Yield Grade
Quality Grade 1 2-3 4-5
Prime - 8.00 -
Choice 4.00 Base -15.00
Select - -10.00 -
Light Carcasses (<550bs.) -10.00
Heavy Carcasses (>950 lbs.) -10.00
FED CATTLEMARKET SIMULATOR
Complete Premium-Discount Grid ($/carcass cwt.)
Yield Grade
Quality Grade 1 2-3 4-5
Prime 12.00 8.00 -7.00
Choice 4.00 Base -15.00
Select -6.00 -10.00 -25.00
Light Carcasses (<550bs.) -10.00
Heavy Carcasses (>950 lbs.) -10.00
FED CATTLEMARKET SIMULATOR
Carcass Distribution(Medium Genetic Type, 1250 Pounds)
Yield Grade
Quality Grade 1 2-3 4-5
Prime 5 8 1
Choice 21 35 4
Select 10 16 2
Light Carcasses (<550bs.) 0
Heavy Carcasses (>950 lbs.) 0
FED CATTLEMARKET SIMULATOR
Grid Pricing Steps(Medium Genetic Type, 1250 pounds)
STEP 1. Negotiate the base price $120.00/ dressed cwt
STEP 2. Calculate the net premium or discountMultiply the percentage of carcasses in each cell (in decimal form) times the respective premium or discount cell in the premium-discount grid.
[($12 x 0.05) + ($8 x 0.08) + (-$7 x 0.01) + ($4 x 0.21) + ($0 x 0.35) + (-$15 x 0.04) + (-$6 x 0.10) + (-$10 x 0.16) + (-$25 x 0.02) +] + [(-$10 x 0.00) + (-$10 x 0.00)] = -$1.29/cwt
STEP 3. Add STEP 1 to STEP 2($120 - $1.29) $118.71/cwt
Net Grid Price = $118.71/dressed cwt
FED CATTLEMARKET SIMULATOR
Grid Pricing Results
Base price = $120/carcass cwt.Plus premiums = $2.08 (34 head)Minus discounts = -$3.37 (33 head)Net price = $118.71/carcass cwt.
FED CATTLEMARKET SIMULATOR
Select Discount Pattern
-20
-15
-10
-5
0
5
34 41 48 55 62
Percent Select
($/c
wt.)
Base Discount Weight
Heavy
Light
FED CATTLEMARKET SIMULATOR
Quality Grade Premiums and Discounts (1996-2008)
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
11/4
/199
6
5/4/
1997
11/4
/199
7
5/4/
1998
11/4
/199
8
5/4/
1999
11/4
/199
9
5/4/
2000
11/4
/200
0
5/4/
2001
11/4
/200
1
5/4/
2002
11/4
/200
2
5/4/
2003
11/4
/200
3
5/4/
2004
11/4
/200
4
5/4/
2005
11/4
/200
5
5/4/
2006
11/4
/200
6
5/4/
2007
11/4
/200
7
5/4/
2008
Week
$/ d
ress
ed c
wt
Prime Select Standard Certified
FED CATTLEMARKET SIMULATOR
Yield Grade 4-5 Discount Pattern
-20
-15
-10
-5
0
5
0 2 4 6 8
Percent Yield Grade 4-5
($/c
wt.)
Base Discount Weight
Light
Heavy
FED CATTLEMARKET SIMULATOR
Yield Grade Premiums andDiscounts (1996-2008)
-30
-25
-20
-15
-10
-5
0
5
10
11/4
/199
6
5/4/
1997
11/4
/199
7
5/4/
1998
11/4
/199
8
5/4/
1999
11/4
/199
9
5/4/
2000
11/4
/200
0
5/4/
2001
11/4
/200
1
5/4/
2002
11/4
/200
2
5/4/
2003
11/4
/200
3
5/4/
2004
11/4
/200
4
5/4/
2005
11/4
/200
5
5/4/
2006
11/4
/200
6
5/4/
2007
11/4
/200
7
5/4/
2008
Week
$/ d
ress
ed c
wt
YG 1 YG 2 YG 4 YG 5
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Constant live price and comparable dressed and grid prices by genetic type and weight
70.00
75.00
80.00
85.00
90.00
95.00
100.00
105.00
110.00
115.00
120.00
125.00
130.00
135.00
140.00
1200 1225 1250 1275 1300 1200 1225 1250 1275 1300 1200 1225 1250 1275 1300
Weight
Pric
e ($
/cw
t)
Dressed price Grid price Live weight price
Low Medium High
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Constant dressed price and comparable live and grid prices by genetic type and weight
70.00
80.00
90.00
100.00
110.00
120.00
130.00
1200 1225 1250 1275 1300 1200 1225 1250 1275 1300 1200 1225 1250 1275 1300
Weight
Pric
e ($
/cw
t)
Live weight price Dressed price Grid price
Low Medium High
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Feeder and packer profit (constant dressed weight price) over genetic types and weights
-60.00
-40.00
-20.00
0.00
20.00
40.00
60.00
80.00
1200 1225 1250 1275 1300 1200 1225 1250 1275 1300 1200 1225 1250 1275 1300
Weight
Prof
it/he
ad o
r /un
it
Feeder profit Packer profit
Low Medium High
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Price relationships
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47
Trading week
Pric
e ($
/cw
t)
Live Dressed Grid Boxed beef
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Boxed beef prices and marketings
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47
Trading week
Pric
e ($
/cw
t)
0
10
20
30
40
50
60
Num
ber o
f pen
s
Boxed beef price Marketings
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR
Marketings vs Select, yield 4-5 discounts
-30.00
-25.00
-20.00
-15.00
-10.00
-5.00
0.00
5.00
22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47
Trading week
Pric
e ($
/cw
t)
0
10
20
30
40
50
60
Num
ber o
f pen
s
Select discount Yield 4-5 discount Marketings
FED CATTLEMARKET SIMULATOR
Futures Markets
FED CATTLEMARKET SIMULATOR
Economic Roles of Futures Markets
1. Forward Pricing and Risk Transfer Futures markets can be used as a temporary substitute
for a cash market position – to manage price risk and establish profits
FED CATTLEMARKET SIMULATOR
Economic Roles of Futures Markets
2. Price Discovery Futures markets are open, competitive, markets with
publicly reported prices – thus they provide information about what market participants think prices will be in the future
FED CATTLEMARKET SIMULATOR
Futures Contract Specifications
One hundred 1250# animals Expire at eight week intervals Cash settled at the average price for 1250#
animals during the expiration week
FED CATTLEMARKET SIMULATOR
Trading ExampleWeek 61: Sell Week #72 Contract for $81Week 72: Buy Week #72 Contract for $75
Futures Gain/Loss = Sell Price - Buy Price$6 = $81 - $75
Week 61: Buy Week #72 Contract for $81Week 72: Sell Week #72 Contract for $75
Futures Gain/Loss = Sell Price - Buy Price-$6 = $75 - $81
FED CATTLEMARKET SIMULATOR
Types of Orders Market Order: Buy/sell at the current market
price and the order is executed immediately Limit Order: Buy/sell at a specified price or better
which establishes price but the order may never be filled
Stop Order: A limit order which becomes a market order when the market touches the specified price
FED CATTLEMARKET SIMULATOR
Limit Orders Used to get in the market at a given price
Target long at price below current market Target short at price above current market
Used to get out of the market at a given price Current long to sell at target above current market Current short to buy at target below current market
FED CATTLEMARKET SIMULATOR
Stop Orders
Used to stop losses from adverse market moves Current long use sell stop at price below current
market Current short use buy stop at price above current
market
FED CATTLEMARKET SIMULATOR
Cash Settlement Examples
What should you do during Week #72?
(1) Week #72 Contract Price @ $75Cash price Range $71 - $73
(2) Week #72 Contract Price @ $75Cash Price Range $77 - $80
FED CATTLEMARKET SIMULATOR
Using the Three Types of Orders in an Up Market: During Week 61
Market Order:Long #72 @ $81
Sell Limit #72 @ $84(protect profits)
Sell Stop #72 @ $79(limit losses)
FED CATTLEMARKET SIMULATOR
Using the Three Types of Orders in a Down Market: During Week 61
Market Order:Short #72 @ $81
Buy Stop #72 @ $83(limit losses)
Buy Limit #72 @ $78(protect profits)
FED CATTLEMARKET SIMULATOR
Example of Reported Prices
Average Cash Price
Futures Contracts:Expiration WeekExpiration WeekExpiration Week
#61
#64#72#80
Prices$78.00
$78.50$81.00$76.00
FED CATTLEMARKET SIMULATOR
72
{
Forward Pricing vs. Price TakingPlaced Marketed
54 61
70 71 73 74
{Price Taking
Forward Pricing
64 80
FED CATTLEMARKET SIMULATOR
Trades This WeekBuyXX
Week4040242424
Price72..5572..6078..0077..9577..90
Profit/Loss0.000.002.001.901.80
Open Position StatusNumber
033
Week243240
Buy/Sell-SB
Avg. Price0.00
76.9872.55
Est. Value0.00
2012.62172.51
Estimated Value of Open Positions 2185.13
Profit/Loss (net)3450.03230.06
0.00
Contract Week243240
# Contracts Closed1050
Closing/Opening78.0076.4072.60
Profit/Loss of Closed Positions 3680.09Contract for Week 24 Cash Settled at $76.80
Sell
XXX
Packer 4 - Futures TransactionSummary – Week 24
FED CATTLEMARKET SIMULATOR
FED CATTLEMARKET SIMULATOR