Cattle Feeder Spread

A cattle feeder spread is a processing spread trade where feeder cattle (thin cows) futures are bought (long) and live cattle (fat cows) futures are sold (short) simultaneously. Cattle feeders use this hedging strategy to hedge the later purchase price of feeder cattle and the later sale price of live cattle. Cattle feeders purchase feeder cattle, fatten them and then sell them as live cattle ready to be slaughter.