Nothing ever changes when it comes to market risk—it will always be there. You don’t have to like it but you do need to manage it. Managing your feed cost price risk can enhance your firm’s bottom line and that’s a key goal for any cattle operation.
Market risks include two components, regardless of where your business operation is located—price and basis. Prices for feed grains, like corn and soybean meal, are discovered in the Chicago Board of Trade (CBOT®) futures markets. Basis is the relationship between a local cash market (e.g., feed supplier) price and the related CBOT futures price.