Cross Hedging Cull Cows, MF-2267 Click on the image above to download a complete copy of this publication in PDF format. Download a free copy of the Adobe Acrobat Reader. Cow-calf producers, cow feeders, and processors face significant price risk.
Similar variability prevails across other locations and cow grades.
Given this variability, it is important that cow-calf producers, cull cow feeders, and cow processors have some mechanism to manage price risk. Currently, there is no futures market in which to directly hedge cull cows. One alternative is to use live cattle futures as a cross hedge. This new futures contract provides producers, packers, processors, and retailers the opportunity to reduce their price risk by hedging in a commodity market more closely linked to cull cow prices. The purpose of this bulletin is to explain how to cross hedge cull cows in the 90-percent lean, boneless beef futures contract and to examine the associated hedging risk.