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BeefBasis.com A Web Based Cattle Basis Analysis & Forecasting Tool. Dr. Kevin Dhuyvetter and Dr. James Mintert Department of Agricultural Economics Kansas State University Kole Swanser Custom Ag Solutions Kansas Livestock Association Convention November 30, 2006. Feeder Cattle Basis.

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beefbasis com a web based cattle basis analysis forecasting tool

BeefBasis.comA Web Based Cattle Basis Analysis & Forecasting Tool

Dr. Kevin Dhuyvetter and Dr. James Mintert

Department of Agricultural Economics

Kansas State University

Kole Swanser

Custom Ag Solutions

Kansas Livestock Association Convention

November 30, 2006

feeder cattle basis
Feeder Cattle Basis

Basis=Cash price–Futures Price

Cash price = Futures price + Basis

Futures price

+ Expected basis

Expected cash price

2

the problem
The Problem
  • Basis can vary dramatically between feeder cattle weight classes, market locations, and from year to year
  • Effective price risk management requires that you be able to forecast basis

Futures price

+ Expected basis

Expected cash price

3

the solution
The Solution
  • Research on feeder cattle prices suggests many factors affect cash prices
    • Key Variables: sex, weight, lot size, frame size, corn prices, fed cattle prices, market location
  • Factors that affect cash feeder cattle prices also impact basis
  • Transaction level sales data for multiple years and market locations are required to quantify these variables’ impact on basis

6

the solution7
The Solution

Develop a web-based feeder cattle basis forecasting tool where forecasts are region-specific and account for cattle type and current market conditions

www.BeefBasis.com

7

modeling
Modeling

Model inputs/variables

  • Lot characteristics (supplied by producer)
    • Location
    • Frame and Class
    • Expected Weight
    • Sex
    • Expected Sale Date
    • Lot Size
    • Futures Prices (automated in final version)

8

modeling9
Modeling

Feeder Cattle Futures Basis Models

  • Model A

Basis = f(lot size, weight, sex, frame, class, contract change, feeder cattle futures, month)

  • Model B

Basis = f(lot size, weight, sex, frame, class, contract change, live cattle and corn futures, month)

9

beefbasis com
BeefBasis.com
  • Provides feeder cattle basis forecasts
    • Better than historical averages
    • Incorporate current market conditions
    • Forecasts for 15 states will be available

AL, AR, FL, IA, KS, KY, MO, MT, NE, ND, OK, SD, TN, TX, WY

  • Provides Hedge Analysis
  • Data available for downloading into Excel

21