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THE CATTLE CRUSH AND REVERSE CRUSH - …
1 | THE CATTLE CRUSH AND REVERSE CRUSHWHAT IS THE CATTLE CRUSH ?The CATTLE CRUSH trade seeks to replicate the gross margin of a typical feedlot operation by calculating the spread between input costs and the output sale price. For a typical feedlot, the two primary inputs are feeder CATTLE and corn while the output is live CATTLE , which are sent to market once the feeding process ends. The long CRUSH trade combines taking a long position in feeder CATTLE and corn with corresponding short positions in live CATTLE . The approximate ratio of corn, feeder CATTLE and live CATTLE therefore is as follows: 2 corn and 3 feeder CATTLE to 6 live CATTLE .
2 | THE CATTLE CRUSH AND REVERSE CRUSH The cattle crush spread for August 2014 Live Cattle, which is what we showed on page 1, may be calculated as follows:
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