What is Feeder Cattle?
Feeder Cattle are steers (males) or heifers (females) old enough to be placed in a feedlot where they will be fattened prior to slaughter. Feeder calves are under 1 year of age. Feeder yearlings are between 1 and 2 years old. These types of cattle are a commonly bred in purpose-built cow and calf production houses.
Uses of Feeder Cattle
Feeder Cattle are purposely bred as a means of meat for consumption are often fed grain, corn and sugar syrup. This is done to increase the weight and the fat content of the meat so that it is more palatable.
Risks of Feeder Cattle
Like any futures contract, there is always the possibility that the underlying asset i.e. Feeder Cattle will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of feeder cattle to rise), if this were to happen and the feeder cattle fell in price your long position in feeder cattle will decrease in value.
Like any livestock the inherent risk of disease such as mad cow. Weather conditions such as droughts, floods or cyclones can effect the production levels of cattle.