Taking Advantage of a Great Cattle Market



“We’ve made a tremendous run since January of 2014,” said Henry Kornegy in a recent Northern Ag Network interview.  The commodity broker that founded Jackson Commodities in 1987 was, of course, discussing the wild ride that the cattle market has been on.  But, with great prices comes great responsibility.  How do you make sure you’re making the most of this market?

At Jackson Commodities, Kornegy says they are using mostly put options rather than going into the futures market.  This, he says, helps protect you from the down-side.
According to The Options Guide, “A put option is an option contract in which the holder (buyer) has the right (but not the obligation) to sell a specified quantity of a security at a specified price (strike price) within a fixed period of time (until its expiration).”
“We’re advising our people to take advantage of the prices we have here by buying some puts,” says Kornegy, “not just at the money, because they’re extremely expensive with the volatility, but slightly out of the money and/or low enough to keep the price reasonable and still give them good protection on the cattle as we go into the summer and fall.”
As for a market forecast, Kornegy says that if we are truly starting to rebuild the herd as heifer retention would lead you to believe, he expects that we could see prices stay in this neighborhood for the next eighteen months to two years.

© Northern Ag Network 2015

Haylie Shipp

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