Dealing with Risk

Livestock producers face a great deal of risk. One is uncertain weather, which affects feed costs, the availability of feed and forage, rates of gain, conception rates, survivability of young animals and shipment. Another risk is the constant threat of
disease. Livestock producers know that staying on top of animal health requires the best management in agriculture. Producers have managed such production risk with top notch husbandry practices. But no amount of husbandry can address market
risk – the uncertainty of prices at market time, owing to shifting supply and demand factors. That’s where the futures markets come in. CME Group developed livestock futures to provide producers with forward pricing opportunities for managing market risk – to lock in profits, enhance business planning and facilitate financing – all the
benefits that futures provide other sectors of the farm economy.

Details: The Concept of Futures

Video: The Basics of Futures and Options