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. What kinds of derivatives are types of forward commitments?

    A derivative is a type of security in which the price of the security is dependent on underlying assets. A derivative could ... Read Full Answer >>
  2. What does the underlying of a derivative refer to?

    A derivative security is a financial instrument in which the price of the derivative is dependent on its underlying asset. ... Read Full Answer >>
  3. How can an investor terminate a derivative contract?

    Most derivatives contracts have provisions allowing for early termination and netting out the initial investment. The early ... Read Full Answer >>
  4. How can an investor profit from a decline in the real estate sector?

    Speculation enables investors to profit from a decline in the real estate sector. The most popular forms of speculation for ... Read Full Answer >>
  5. What does it mean to take delivery of a derivative contract?

    When trading derivative contracts for options, a buyer or holder may have to take delivery of the underlying asset if the ... Read Full Answer >>
  6. 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 >>
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. Options & Futures

    Understanding Gold Quote Prices

    Willing to trade gold but puzzled by gold price quotes and terminology? Investopedia explains how to read gold price quotes.
  9. Chart Advisor

    Silver Stocks Facing Major Resistance

    Active traders in the commodity markets are taking note of silver.
  10. 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.

You May Also Like

Hot Definitions
  1. Fracking

    A slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations ...
  2. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  3. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  4. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  5. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  6. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
Trading Center