What does market protection mean in a cattle contract?

What does market protection mean in a cattle contract?

E. Market Protection: As a condition to providing cattle, the First Party is requiring the Second Party to pay for the cost of a “put” or “call” option contract or contracts for the purpose of providing protection for the benefit or the First Party and its Bank against future market fluctuations in the price of the Cattle (the Market Protection”).

Who is the first party in a cattle feeding contract?

WHEREAS, First Party is the owner of certain cattle and desires Second Party to feed, water and care for said cattle, until said cattle are ready to be sold;

What should be included in the sale price of cattle?

The Sale Price, for purposes of computing the amount due the Parties hereto, shall include all commissions, fees, transportation and other normal handling charges common to the industry/paid by the First Party in connection with the sale of the cattle., 5.3 TIMING OF PAYMENTS.

Who is the second party in a feed lease agreement?

Second Party warrants and represents to First Party that he is owner or tenant of said feed facilities, that he is legally able to execute this agreement and care for the cattle at this location, and that the feeding of cattle at this location shall not violate any applicable local, state or federal laws, including zoning laws. 3. INSURANCE.

What is the cost basis of a livestock sale?

The cost basis in the livestock sold is the initial amount paid plus items such as shipping or other fees paid in conjunction with the purchase. A discussion of the tax basis of raised livestock is included later in this article.

What is included in an agreement to sell a cow?

Among the terms typically included in the agreement are the purchase price, the closing date, the amount of earnest money that the buyer must submit as a deposit, and the list of items that are and are not included in the sale. How do you write a bill of sale for a cow?

When do you calculate basis for live cattle?

Basis for the week ending October 24 was computed using the December live cattle futures contract, because by the end of that week, it was the new nearby futures contract. Remember, anything that affects cash prices will affect basis.

When to use a hedging contract for livestock?

Unfortunately, contracts are not available for every month of the year. For example, a producer might plan to market hogs or cattle in January. Neither hogs nor cattle have contracts that mature in January. In cases such as this, the producer should use the contract that matures one month after the livestock are marketed.