1. Home
2. Conferences
3. 2011 Extension Risk Management Education National Conference

AN EDUCATIONAL PROGRAM TO INCREASE BEEF PRODUCER KNOWLEDGE AND USAGE OF PRICE RISK MANAGEMENT TOOLS

Emmit L. Rawls

Summary

Beef producers in the Southeast do not typically make use of price risk management tools but rather take whatever price is offered on day of sale. Based on a successful program used with milk producers, a educational opportunity to learn how to use price risk management tools was offered to beef producers in a 5 county area. The group decided to meet monthly for one year, but later decided to continue for two more years. They were presented information on how to use feeder cattle and live cattle futures contracts, option contracts, forward contracting and Livestock Risk Protection (LRP) insurance. They were also taught the seasonal patterns of stocker calves, feeder cattle, fed cattle and commodity feeds. Producers were allowed to follow 5 price risk management strategies to gain a real feel for how they could be used in their operations. These included use a futures hedge, put options, call options, a combination of puts and calls or window contract and LRP insurance. As a result of the educational program, beef producers have engaged in directly using the futures market, options market, forward contracting of crops, and use of LRP insurance. Producers have also been challenged and motivated by other producers in the group who were more innovative in their usage of price risk management tools. The group continues to meet and evaluate price risk management tools as market conditions dictate.

Details

---