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| I've been using the futures to market some cattle for the Jan/Feb time period, and I am also concerned about the basis getting wider on the 9 weight cattle. Using the historical basis for the past few years I found it to be about $6 under the board for 9 wt steers at the Salina, ks salebarn in Feb. But it is now much wider than that on the big steers.
The futures are cash-settled against feeders with a range of weights from 600 to 850 lb I believe. So probably an average of about 750 pounds is used most days. I think the heavier ones are being discounted due to the extreme high price per pound. At $240 per cwt for a 750 pounder, an extra 150 pounds is another $360 / head!! So if a pound of gain only costs about 70 or 80 cents to put on, the buyers have to back off their bids quite a lot to make up for that huge difference. I still plan on feeding to a weight of 900- 925 to get the most total dollars per head.
Normally I think options are too high but this has led me to use more options instead of straight hedges for these cattle. I would hate to make huge margin calls and then get hit at the salebarn with a wide basis as well. These are interesting times to feed cattle for sure.
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Market ?
