Feed Ratio

AAA

DEFINITION of 'Feed Ratio'

The relationship between the price for which a unit of livestock can be sold in the commodities markets and the price of the food required to raise that unit to market weight. The feed ratio takes the market price of the animal at sale and divides it by the price of the food that the animal must consume. Examples include the hog-corn ratio and the steer-corn ratio. These ratios divide the hundredweight price of the animal by the bushel price of corn.

INVESTOPEDIA EXPLAINS 'Feed Ratio'

Feed ratios help farmers determine how much feed to produce and what to use it for. If 100 pounds of feed is more valuable than the livestock that can be raised with that feed, it makes more sense for the farmer to shift his production to sell more feed directly as a commodity and reduce his production of livestock. The reverse is also true - if livestock is relatively more valuable than feed, the farmer will shift more of his crop toward feeding animals.

RELATED TERMS
  1. Futures Market

    An auction market in which participants buy and sell commodity/future ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  3. Margin

    1. Borrowed money that is used to purchase securities. This practice ...
  4. Pork Bellies

    A cut of pork that comes from the belly of a pig. Pork bellies ...
  5. Commodity Futures Contract

    An agreement to buy or sell a set amount of a commodity at a ...
  6. Exchange Traded Derivative

    A financial instrument whose value is based on the value of another ...
RELATED FAQS
  1. How is fair value calculated in the futures market?

    The fair value is the theoretical calculation of how a futures stock index contract should be valued considering the current ... Read Full Answer >>
  2. What are the major types of insurance policies that insurance companies will offer?

    The principal commodities used in producing chemicals are oil, natural gas, coal and a wide variety of metals and minerals. ... Read Full Answer >>
  3. What is the difference between speculation and hedging?

    Speculators and hedgers are different terms that describe traders and investors. Speculation involves trying to make a profit ... Read Full Answer >>
  4. What are some securities that have spot rates?

    Commodities, currencies and bonds are among the many assets that have spot rates. A spot rate is the current price quoted ... Read Full Answer >>
  5. What is the difference between underwriting and investment income for an insurance ...

    Underwriting and investing are two different methods an insurance company uses to generate income. The underwriting income ... Read Full Answer >>
  6. What are the benefits of using open interest as an indicator?

    Open interest is a good technical indicator of trends and trend reversals for derivative securities markets. The open interest ... Read Full Answer >>
Related Articles
  1. Sectors

    Sugar: A Sweet Deal For Investors

    From sugar beet to sugar cane, this sector is growing despite a lot of sour challenges.
  2. Forex Education

    Intermarket Relationships: Following The Cycle

    Find out how commodity, bond, stock and currency markets interact.
  3. Active Trading

    Learn To Corral The Meat Markets

    Find out how to trade these hog-wild commodities.
  4. Options & Futures

    Trading The Soft Commodity Markets

    Learn the contract specifications for a few of the most heavily traded commodities.
  5. Options & Futures

    Commodities That Move The Markets

    Find out how the everyday items you use can affect your investments.
  6. Mutual Funds & ETFs

    Commodity Funds 101

    These funds make investing in gold, oil or grain an easier prospect.
  7. Insurance

    Futures Fundamentals

    For those who are new to futures but want a solid understanding of them, this tutorial explains what futures contracts are, how they work and why investors use them.
  8. Chart Advisor

    Commodity Traders are Watching These 3 Charts

    As we head towards the summer months, many commodity traders are looking to diversify their holdings and to protect themselves against inflation.
  9. Investing Basics

    Understanding Non-Deliverable Forward (NDF)

    A foreign exchange hedging strategy where the parties agree to settle the profit or loss in a foreign currency futures contract before the expiration date.
  10. Chart Advisor

    Copper Is Headed For A Pullback

    While copper prices have stabilized over the past few weeks it may still be too early for most commodity traders to enter a long position.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center