ESTIMATED PRODUCTION: 300 Head of Brahman in a year basis divided into six sections in a year, and sold to the market onceeach section is completed (refer to the livestock finishing plan).
BREAK EVEN ANALYSYS:
* Living expenses and other source of income are not related to farm business.REALISTIC PRICE OBJECTIVE:
The following tables represent Price Goal, Time Goal, Revenue Goal, and Market Choice.
In Colombia, the local market price for live cattle is approximately $60/cwt(range between $58/cwt - $62/cwt). Taking into account that the price for live in the futures market in USA is above and has been above the local Colombian price, so all of the live cattle from thisoperation is going to be sold (short) in the futures market in order to protect myself against a possible price decline during the coming months. The table below shows when is that each of the steersare going to be sold. There are 300 Head divided into 6 sections.
In order to carry the plan, the futures hedge must be places accordingly with the sale of the section of cattle, and prices ofboth local and futures market for the respective months should be monitored to calculate profit as shown in the following example. A line of credit must be opened in a bank to make transactions forsuch change in prices. There’s a total disposition of assuming a very high risk.
EXAMPLE: The first section of cattle entered mid-February. I plan to sell this section to the local cash market inmid-December. The December live cattle future is 86.650 per hundred pounds and the cash price in Colombia has a basis of 24.65 under the December futures price.
*Hedging with these...