What is? & How to Use: Risk Management and Livestock Risk Protection

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Moderated by: Dr. Elliot Dennis, Agriculture Economics – UNL

The webinar began with Richard Jelinek, Vice President – Global Education, FCM Division of INTL FCStone discussing the importance of Risk Management Price and Basis Risk (4min 20 seconds). Richard tells you why price risk management is important. “Success favors the prepared. Success also favors those willing to change.” Richard takes you through volatility, risk and reward aka market opportunity, and overall cattlemen’s market – price AND basis.

When do you pull the trigger on risk management? The second presenter was Mike Maroney, Client Services Manager at CIH Beef Margin Management Program and he gives insight to this question (16 min 30 seconds). There is not a discrete moment in time when you are trying nail the to hit the exact high or exact low in the marketplace. The answer: It is a process! Yes, the ideal time to hedge is during the high but you will not know it is the high until it becomes hindsight. Mike goes through some tips and factors to consider when developing your risk management game plan. RESOURCE: MarginManager.com

Miles Bearden, Risk Management Consultant, FMC Division of INTL FCStone covers risk management applications – futures & options (26 min 50 seconds). What exactly is hedge? True hedge results are experienced when you get the net result of the two market positions, local cash market and futures/options/otc. Miles go through examples of futures strategies, what if scenarios and how futures convey obligations.  He then discusses options strategies, what if scenarios and how options convey rights. Miles finishes up with key points when hedging with futures and options.

Next Pete Fish, Risk Management Associate, FCM Division of INTL FCStone digs deeper into risk management alternatives – video contracts and livestock risk protection (41 minutes 45 seconds). Pete goes into marketing tools such as forward pricing using video auctions and livestock risk protection. If you take anything away from this presentation it should be that knowing your breakeven is key to using these tools.

We finish up the presentations with Kenny Burdine, Extension Livestock Economist, UK Agricultural Economics (53 minutes). Kenny stresses the importance of having a game plan when using price risk management tools. Risk management plans force you to develop a solid plan, gain knowledge of your market, understand your options, and identify your resources. Risk management plans should include multiple strategies, acknowledgment of risk tolerance, and consideration of your financial situation.

Questions and Answers (1 hour 5 minutes 40 seconds)

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