Cattle/Grain Squash

Posted June 16th, 2011 — Filed in Marketing

Question: Can you explain how the crush works or should I join your site for more information on this. I have a basic understanding of it but I don’t know how to play the commodities with it. If that makes sense. Maybe it is too risky but I would like to see if it work in the actual commodities market.

Answer: I guess you went to Ann’s class as I don’t use the fat cattle, feeder cattle, grain spread as a way to trade commodities  (I think she calls this a “Squash”).   We don’t talk about how to trade commodities on our site.  Since I’m not a bonded commodity broker I’m not allowed to do that.

I used the  information from that spread  when I was buying cattle for the feedlot in Canada as it really helped tell me what people thought the future cash prices would be.  Not what they would be but what they thought they would be. That helped me know when the middle weight cattle should be sold or kept as well as using over or underpriced.

A commodity broker really likes this spread as it generates a lot of commissions. If you were to study it for several years and knew some of the extremes that it will go to it would probably work alright. Actually there is less risk and more reward to just trade cattle or grain alone, not as a three way spread.