AAEC 4317/5317: Fall 2016 Commodity Futures Trading and Analysis Hedging project
AAEC 4317/5317: Fall 2016 Commodity Futures Trading and Analysis Hedging project: Due on 01Nov 2016 Name: _________ Suppose that you are the manager of a Texas Cattle feedlot. On 01 June2016, you bought 1,000 feeder cattle with the plan of feeding the animals until they reach an average weight of 1,200 pounds. You estimated that it would take approximately 5 months to finish the cattle and you plan to sell the fed cattlebythe end ofNovember2016. On 01 June2016 the closing price for fed cattle in the local cash market was 130.00cents per pound. However, you are worried that the cash prices for live cattle will decrease during the November-December because of increased supply of fed cattle in the market, and you may not be able to recover the costs. So, you wanted to explore the possibility of devising a hedging strategy using CME Live Cattle Futures Contracts...